—       rKOM   THE   PRESIDENT'S 

T0  THE  UNIVERSITY  LIBRAE 

Shall  the  Government  Own 
and  Operate  the  Railroads, 
the  Telegraph  and  Telephone 
Systems?  Shall  the  Munic- 
ipalities Own  Their  Utilities? 


THE  NEGATIVE  SIDE 


The  National  Civic  Federation 

i,j  ii  ,  i 

Headquarters:  Thirty-third  Floor 

Metropolitan  Tower 

New  York  City 

1915 


EXECUTIVE     COUNCIL 

OF 

tbe  Rational  Civic  federation 


SETH  LOW.  AUGUST  BELMONT. 

President  Chairman  Department  Compensation  In- 

dustrial Accidents 

SAMUEL  GOMPERS. 

Vice-President  EMERSON  McMILUN. 

* 


BENJAMIN  IDE  WHEELER.  uti 

Vice-Preside  nt 

.SAACN.SEUGMAN.  GEORGE  W.  PERKINS. 

Chairman  Social  Insurance  Department 
Treasurer 

RALPH  M.  EASLEY.  VINCENT  ASTOR. 

Chairman  Executive  Council  Chairman  Food  and  Drugs  Department 

JOHN  HAYS  HAMMOND,  ALTON  B.  PARKER. 

Chairman  Industrial  Economics  Depart-  Chairman    Department    on     Reform     in 

men*  Legal  Procedure 

LOUIS  A.  COOLIDGE.  } 

Chairman  Welfare  Department 

Chairman     Dtpartment    on    Regulation 

MISS  MAUDE  WETMORE,  'f  '"i"M"  a>«""*"" 


E.  R.  A.  SELJGMAN,  Chairman     Departmint    on    Industrial 

Mediation  Latvs 
Chairman   Taxation  Department 

WILLIAM  R.  WILLCOX.  D.  L,  CEASE. 

Chairman  Department  on  Pensions  Secretary 


Contents 


The  Trend  Toward  Government  Management 

of  Business       .         .         .         JEREMIAH  W.  JENKS 

What  Shall  the  Government  Own 

and  Operate  ?       .         .         JONATHAN  BOURNE,  JR. 

The  Failure  of  Government  Telegraph 

and  Telephone  Systems        .        F.  G.  R.  GORDON 

Municipalization  or  a  Just  Regulation? 

A  Plea  for  the  Facts       .         .         J.  W.  SULLIVAN 

The  Failure  of  Government  Ownership 

of  Railroads          .         .        .         F.  G.  R,  GORDON 

City  Transit  Systems :  Municipal  vs.  Company 

Ownership  and  Operation        .        J.  W.  SULLIVAN 


Addresses  delivered  at  the  Fifteenth  Annual  Meeting  of 

The  National  Civic  Federation 

New  York  City,  December  4,  1914 

300401 


PREFATORY. 

At  the  Annual  Meeting  of  The  National  Civic  Federa- 
tion, December  4  and  5,  1914,  one  session  was  devoted  to 
a  discussion  of  the  question,  "How  Far  Shall  the  Govern- 
ment Enter  into  Private  Industry?" 

The  program  at  this  session  consisted  of  addresses 
dealing  with  the  question  as  it  relates  to  government  owner- 
ship of  railroads,  government  ownership  of  telephone  and 
telegraph  systems,  and  municipal  ownership  of  public 
utilities.  Upon  the  affirmative  side  the  papers  presented 
were  by  Former-Governor  Walter  R.  Stubbs,  of  Kansas; 
Congressman  David  J.  Lewis,  of  Maryland;  and  Dr.  Fred- 
eric C.  Howe,  Commissioner  of  Immigration,  and  upon 
the  negative  side  by  Former-Senator  Jonathan  Bourne,  Jr., 
of  Oregon;  F.  G.  B.  Gordon  and  J.  W.  Sullivan.  The 
session,  which  was  presided  over  by  Samuel  Gompers, 
President  of  the  American  Federation  of  Labor,  was 
opened  by  Professor  J.  W.  Jenks,  who  analyzed  the  alleged 
general  trend  toward  government  management  of  business. 

The  National  Civic  Federation  intends  publishing  the 
entire  proceedings  of  this  session  in  one  pamphlet.  There 
has  also  been  a  demand  for  pamphlets  containing  the 
affirmative  and  negative  sides  respectively.  The  remarks 
of  Professor  Jenks  are  to  appear  in  each.  This  pamphlet 
is  devoted  to  the  negative  side  only. 

The  paper  by  Mr.  Sullivan  on  "City  Transit  Systems" 
had  been  prepared,  but  owing  to  the  pressure  of  other  work 
at  the  meeting  was  not  then  read. 

The  price  of  single  copies  of  the  pamphlets  is  50  cents; 
for  twenty-five  copies  or  more  the  price  is  25  cents  each. 


THE  TREND  TOWARD  GOVERNMENT 
MANAGEMENT  OF  BUSINESS 

JEREMIAH  W.  JENKS. 

When  the  war  in  Europe  broke  out  this  summer,  I 
heard  immediately  from  several  Americans  who  were 
abroad  the  expression  of  the  hope  that  the  United  States 
Government  would  at  once  so  amend  our  antiquated  navi- 
gation laws  as  to  permit  the  rapid  development  of  a 
merchant  marine.  For  some  two  or  three  weeks  we  in 
Berlin  were  almost  entirely  cut  off  from  communication 
with  the  outside  world,  but  when  we  again  had  the  oppor- 
tunity of  seeing  American  newspapers,  most  of  us  were 
surprised  to  learn  that  our  Government,  while  freeing  the 
hands  of  private  individuals  in  the  purchase  of  merchant 
ships,  had  also  determined  to  create  for  itself  a  merchant 
marine,  owned  and  managed  by  the  Government. 

If  the  underlying  reason  for  such  action  were  the 
greater  possibility  of  having  suitable  ships  promptly  avail- 
able as  transports  or  auxiliary  cruisers  in  case  of  war,  as 
many  people  surmise,  no  one,  I  think,  would  object. 

If  the  purpose  were  to  seize  the  opportunity  to 
take  a  step  forward  along  socialistic  lines,  as  the  recom- 
mended purchase  of  the  telegraphs,  long  distance  tele- 
phones, and  the  extension  of  the  work  of  the  parcels  post 
led  some  to  think  was  probable,  many  persons  would  raise 
serious  objections. 

There  seems  to  be  so  strong  a  trend  toward  Government 
management  of  business,  not  only  in  this  country  but  the 
world  over,  that  it  is  well  worth  while  to  note  its  direction 
in  various  lines  of  activity,  and  then  to  inquire  whether  it 
can  be  determined  in  individual  cases  how  far  it  is  wise  to 
go,  and  what  the  principles  are  by  which  a  positive  decision 
can  be  reached. 


6 


No  one  questions  that  in  time  of  war  the  Government 
should  go  to  great  extremes  in  not  only  direct  military 
defense  but  also  in  the  indirect  defense  of  the  country  by 
preventing  commercial  loss  or  financial  crises.  The  most 
unusual  lengths,  however,  to  which  some  Governments 
have  lately  gone  have  startled  not  a  few  people  and  have 
naturally  aroused  these  questions. 


TRANSPORTATION. 

ROADS. — Many  of  us  are  old  enough  to  remember  the 
plank  roads  of  forty  or  fifty  years  ago  in  the  lumber  pro- 
ducing districts  of  the  Middle  West  that  were  afterward 
followed  by  well  drained  and  well  built  gravel  or  stone 
roads,  all  of  them  built  by  private  companies  and  man- 
aged as  toll  roads  for  the  use  of  which  all  traffic  paid  a 
toll,  sufficient  often  to  yield  a  substantial  profit  to  the 
company,  but  which  beyond  doubt  yielded  a  much  larger 
benefit  to  the  community.  The  local  taxpayers  were  as  yet 
too  scattered  and  too  poor  to  build  the  roads  and  the 
development  of  the  country  was  largely  dependent  upon 
roads  that  at  least  were  passable.  Even  after  the  days 
of  toll  roads  had  largely  passed,  toll  bridges  were  fre- 
quently found,  and  we,  all  of  us,  even  here  in  New  York, 
have  the  opportunity  of  patronizing  toll  ferries  to  the 
present  day. 

Throughout  the  civilized  world  to-day  nearly  all  roads 
are  owned  and  managed  by  the  state,  free  to  the  public. 
They  are  often  poorer  than  were  the  old  toll  roads,  but 
there  is  much  less  annoyance.  In  the  newer  and  wealthier 
states  it  has  become  the  universally  adopted  policy  for  the 
public  to  care  for  the  roads,  and  since  bicycle  and  auto- 
mobile owners  have  become  influential,  they  are  often  well 
cared  for. 

With  us  the  development  of  roads  has  been  primarily, 
almost  solely,  for  commercial  and  social  purposes  only.  In 


many  European  countries,  from  the  days  of  ancient  Rome 
to  the  present,  the  roads,  as  regards  both  location  and 
upkeep,  have  in  many  instances  served  a  military  purpose 
as  well,  and  that  fact  has  often  determined  both  their 
location  and  type.  The  old  Roman  Watling  Street,  stretch- 
ing across  England,  is  an  excellent  example  of  this  type. 

RAILROADS. — The  course  of  the  development  of  the  rail- 
way systems  bears  some  resemblance  to  that  of  the  high- 
ways, but  there  are  marked  differences  in  all  countries 
which  sometimes  indicate  a  difference  in  principle.  In 
our  own  country,  as  we  know,  the  railroads  have  been  and 
still  remain  private  property,  under,  however,  a  govern- 
ment control  which  has  been  gradually  increasing  in  extent 
and  stringency  for  many  years.  In  several  foreign  coun- 
tries the  Government  has  built  and  manages  many  if  not 
all  the  railroads.  The  principles,  however,  of  the  adminis- 
tration of  the  public-owned  railroads  are  materially  dif- 
ferent from  those  of  the  ordinary  highways. 

In  the  first  place  ordinary  highways,  though  they  must 
be  built  at  considerable  cost  and  require  a  little  care  and 
expense  for  upkeep,  differ  absolutely  in  principle  from 
railroads  in  that  the  latter  demand  a  skilled  organization 
and  management  adapted  to  a  highly  complex  business, 
while  roads  require  no  management  at  all  for  their  daily 
use. 

Again,  in  some  countries,  such  as  Germany,  although 
the  railroads  are  generally  laid  out  with  reference  to  the 
benefit  of  commerce,  the  decisive  factor  in  determining  the 
location  in  many  instances  is  military  need.  And  further, 
they  are  not  free,  but  are  one  of  the  chief  sources  of  revenue, 
thus  taking  the  place  of  certain  taxes,  and  in  practically 
all  instances  laying  a  burden  upon  commerce  much 
heavier  than  that  laid  by  private  railway  companies  in 
our  own  country. 

In  Germany  the  ultimately  decisive  factor  in  deter- 
mining Government  ownership  and  management  is  mili- 


8 

tary;  in  some  other  countries  the  decisive  factor  is  pri- 
marily political  and  possibly  financial.  Each  country  needs 
to  be  studied  by  itself  and  in  making  comparison  between 
the  experience  of  different  countries  one  should  be  careful 
to  take  into  account  all  determining  factors — a  practice 
that  has  been  by  no  means  universally  followed. 

Doubtless  in  all  cases  the  fundamental  principle  to 
keep  in  mind  is  that  of  the  public  welfare,  but  in  a  country 
like  Germany,  this  welfare  in  the  mind  of  the  Government 
and  people  as  well,  is  best  served  by  considering  first  the 
military  aspects  of  the  situation,  then  the  political  aspect 
including  the  financial,  and  finally,  perhaps,  the  social 
aspect.  In  our  own  country  we  practically  ignore  the 
military  aspect;  the  political  viewpoint  is  largely  a  matter 
of  party  policy ;  regarding  the  financial  and  social  aspects 
there  have  been  very  decided  differences  of  opinion,  but  I 
have  never  seen  the  viewpoints  on  either  side  worked  out 
carefully  and  without  prejudice. 


THE  POST-OFFICE. 

LETTERS. — The  Post-Office  is  generally  cited  as  the  best 
illustration  of  Government  management.  It  needs  there- 
fore special  attention.  It  should  be  borne  in  mind  that 
the  post  originated  with  the  need  of  kings  and  rulers  to 
send  messages  regularly  to  distant  provinces,  and  that  only 
afterward,  as  a  matter  of  convenience,  did  the  post  serve 
private  individuals  by  either  giving  them  transportation  or 
by  carrying  messages  or  parcels. 

The  second  reason  for  Government  management  was 
the  need  for  secrecy,  first  of  Government  messages,  then 
of  private  business,  it  being  thought  that  the  Government 
might  possibly  be  best  trusted  in  this  regard.  Yet  com- 
plaint is  frequently  made  that  postmen  deliver  important 
letters  to  irresponsible  janitors  and  elevator  boys  in  apart- 
ment houses  in  cities,  and  that  many  cases  of  loss  and  be- 


trayal  of  confidence  thus  result.  Is  the  post-office  more  to 
be  trusted  in  this  regard  than  the  private  telegraph  or  tele- 
phone companies? 

The  development  of  the  uniform  rate  of  postage  on  let- 
ters for  all  distances  is  late — not  till  1840  in  England, 
and  in  the  '60s  in  this  country,  but  this  mere  simplification 
of  rates  has  had  much  to  do  with  the  success  of  the  postal 
service  and  with  its  extension.  It  is  probably  this  uni- 
form rate  that  has  thrown  into  the  foreground  the  social 
and  educational  service  of  the  post  in  sending  into  the 
remotest  districts  at  a  nominal  charge  (far  below  cost  in 
those  localities),  newspapers,  magazines,  books  and  other 
means  of  training.  Here  again  we  properly  put  emphasis 
on  the  social  and  educational  value  of  this  work  in  remote 
districts  where  letters  and  papers  are  carried  at  a  loss. 
Yet  the  Western  Union  Telegraph  Co.  reports  that  to  a 
considerable  degree  it  follows  the  same  policy  and  that  a 
large  percentage  of  its  smaller  offices  are  continued  at  a 
loss. 

POSTAL  SAVINGS  BANKS. — For  some  decades  in  foreign 
countries  (since  1861  in  England),  and  of  late  under  the 
Taft  administration  in  our  own  country,  the  post-office  has 
been  used  to  serve  the  needs  especially  of  the  thrifty  poor  in 
remote  districts  through  Postal  Savings  Banks,  Postal 
Money  Orders,  and  other  devices  that  are  rather  means  of 
protecting  the  poor  against  fraud  and  loss  than  of  promot- 
ing business.  In  Great  Britain  this  includes  also  since 
1865  life  insurance  and  annuities.  In  the  United  States 
and  most  other  countries  the  post-office  has  not  yet  gone 
so  far  in  this  direction. 

PARCELS  POST. — The  direct  promotion  of  business 
through  a  general  parcels  post  seems  to  introduce  a  new 
principle  and  at  once  raises  the  question  whether  or  not 
it  is  wise  for  the  State  to  perform  this  business  function. 
If  so,  it  should  probably  be  justified  on  the  ground  that  it 
does  actually  effect  a  saving  of  industrial  energy  to  the 
people;  that  is  a  question  that  seems  by  no  means  to  have 


10 


been  settled.  A  brief  investigation  made  some  time  ago 
by  the  Alexander  Hamilton  Institute  of  New  York  with 
the  aid  of  some  hundreds  of  shippers  as  to  the  relative 
efficiency  in  many  directions  of  handling  packages  by 
freight,  by  express  and  by  the  parcels  post,  covering  an 
average  business  of  118,000  parcels  per  day,  indicated  that 
although,  in  the  opinion  of  these  shippers,  the  parcels  post 
had  the  advantage  of  the  express  companies  in  cheapness, 
in  all  other  particulars — speed,  convenience  in  pick-up 
and  delivery,  care  in  transit,  collections,  cost  of  insurance, 
tracing  of  lost  packages,  adjustment  of  claims — a  large 
majority  of  the  shippers  preferred  the  express  companies. 
And  even  in  the  matter  of  cost,  the  charges  by  freight  were 
cheaper  than  by  the  parcels  post,  but,  of  course,  the  char- 
acter of  the  packages  largely  differed.  While  the  parcels 
post  had  the  advantage  of  the  express  companies  in  cheap- 
ness and  also  in  certain  instances  in  reaching  out-of-the- 
way  places  at  times  not  reached  by  the  express  companies, 
the  advantages  on  the  whole  rested  decidedly  with  the 
express  companies.  Even  as  regards  cheapness  some  ship- 
pers said  that  the  post  was  unsatisfactory,  since  it  took 
longer  to  prepare  a  package  for  mailing  than  for  express, 
and  if  lost,  the  Post-Office  Department  "fills  out  a  paper 
and  makes  an  attempt  to  locate  it  but  never  finds  the 
goods." 

Again  the  question  of  cost  to  the  public  in  distinction 
from  cost  to  the  shipper  seems  as  yet  entirely  unsettled, 
for,  so  far  as  one  can  learn,  the  Post-Office  Department 
has  made  no  statement  of  cost  accounting  in  connection 
with  the  parcels  post ;  so  that  no  one  can  determine  whether 
really  it  is  carrying  cheaper  than  do  the  express  com- 
panies, or  whether,  as  seems  not  improbable,  the  differ- 
ance  in  charges  to  shippers  is  made  up  by  the  low  rates 
forced  upon  the  railroads  against  their  will,  or  by  shifting 
the  burden  upon  other  branches  of  the  postal  service,  or 
upon  the  taxpayers.  The  railroads  claim  that  they 
have  been  most  unjustly  treated;  and  many  senators  and 


11 

members  of  Congress  agree  that  the  burden  has  been 
placed  in  good  part  upon  them.  Certainly  the  Post-Office 
Department  has  no  right  to  claim  success  in  this  regard 
until  it  can  show  cost  accounts  that  are  clearly  compara- 
ble with  those  of  the  express  companies. 

The  question  of  public  ownership  and  management 
of  the  telephone  and  telegraph  and  the  Government 
management  of  the  parcels  post  is  one  not  to  be  settled 
at  haphazard.  It  is  one  that  demands  scientific  study  and 
a  determination  of  principles.  Yet  in  this  whole  field  of 
Governmental  activity  no  principles  have  been  definitely 
established  on  a  fact  basis  in  this  country.  Many  years 
ago,  in  1867,  when  the  question  of  the  purchase  of  the 
telegraphs  and  railways  was  pending  in  Great  Britain, 
W.  Stanley  Jevons,  one  of  the  most  careful  and  unpreju- 
diced investigators  of  the  last  century,  stated  that  in  his 
judgment  State  management  possessed  advantages  only 
under  the  following  conditions : 

(1)  Where     numberless     widespread     opera- 
tions can  only  be  efficiently  connected,  united  and 
co-ordinated  in  a  single,  all-extensive  Government 
system. 

(2)  Where  the  operations  possess  an  invariable 
routine-like  character. 

(3)  Where  they  are  performed  under  the  pub- 
lic eye  or  for  the  service  of  individuals,  who  will 
immediately  detect  or  expose  any  failure  or  laxity. 

(4)  Where  there  is  but  little  capital  expendi- 
ture, so  that  each  year's  revenue  and  expense  ac- 
count shall  represent  with  sufficient  accuracy  the 
real  commercial  conditions  of  the  department. 

In  other  cases  he  thought  Government  management 
unwise. 

Jevons  thought  the  Post-Office,  in  carrying  letters, 
was  a  success,  while,  in  the  same  article,  he  asserted 
that  it  is 


12 

"but  too  sure  that  some  of  the  State  manufacturing 
establishments,  especially  the  dockyard,  form  the 
very  types  of  incompetent  and  wasteful  expendi- 
ture. They  are  the  running  sores  of  the  country, 
draining  away  our  financial  power." 

In  1875,  summing  up  the  experience  for  some  years  of 
the  Post-Office  with  the  telegraph,  he  regretted 

"the  financial  failure  of  the  telegraph  department 
.     .     .     because    it    puts    an    almost    insuperable 
obstacle  in  the  way  of  any  further  extension  of 
Government  industry  in  the  present  generation." 
He  favored  strongly  a  parcels  post,  but  said  that 
"the    experience    with    the    telegraph    department 
demonstrated  that  a  Government  department  can- 
not compete  in  economy  with  an  ordinary  commer- 
cial firm  subject  to  competition." 

Yet  he  liked  the  idea  of  a  parcels  post  and,  four  years 
later,  in  1879,  he  urges  strongly  the  adoption  of  a  State 
Parcels  Post  for  small  packages  on  the  ground  that  it 
would  be 

"a  really  great  work  of  social  reform  to  be 
achieved."  He  believed  "it  would  be  the  harbinger 
of  universal  free  trade  if  made  international." 
His  reasons  were  social  and  political,  not  economic. 

The  same  line  of  argument,  however,  seemed  to  con- 
vince him  absolutely  that  it  was  not  practicable  or  wise 
for  the  State  to  take  over  the  railways,  chiefly  on  account 
of  the  complexity  of  management  and  the  waste  that 
would  be  almost  certain  to  result  from  Government  admin- 
istration. In  connection  with  the  cost  accounting  that 
I  have  just  mentioned,  this  sentence,  written  in  1874,  in 
England,  is  interesting: 

"No  English  Government  Department  has  ever 
yet,  I  believe,  furnished  a  real  balance  sheet,  show- 
ing actual  commercial  results  from  a  year's  work, 


13 

with  allowances  for  capital  invested,  unless  it  be 
the  Post-Office,  which,  as  I  have  said,  has  little  or 
no  capital  expenditure  to  account  for." 

The  question  arises  again,  can  we  find  a  guiding  prin- 
ciple to  determine  where  the  Post-Office  shall  stop  its 
work?  It  has  already  undertaken  in  practically  all  coun- 
tries the  sending  of  letters,  papers,  small  parcels ;  in  many 
countries  the  work  of  savings  banks  and  postal  money 
orders;  in  still  others,  the  carrying  of  parcels  to  eleven 
pounds,  and  in  some  cases,  far  heavier  than  that;  in  still 
other  countries  it  manages  the  telegraphs  and  telephones, 
and  sells  insurance  and  annuities.  Is  the  principle  to 
be  primarily  to  do  work  for  the  Government?  Is  it  the 
dissemination  of  information  for  social  purposes,  even 
though  it  is  not  self-supporting?  Shall  it  protect  the  sav- 
ings of  the  poor?  Shall  it  promote  private  business?  And 
if  so,  shall  this  be  done  at  the  expense  of  the  taxpayers? 
Or  solely  at  the  expense  of  the  shippers?  All  these  ques- 
tions must  be  answered  before  we  shall  know  where  to 
draw  the  line. 

Many  important  questions  of  governmental  policy 
must  be  given  a  different  answer  in  time  of  war  from  that 
which  would  obtain  in  time  of  peace.  Lincoln  justified 
many  acts  as  war  measures  that  he  would  have  unquali- 
fiedly condemned  in  days  of  peace.  In  our  own  country  the 
State  has  not  insured  private  property  or  lives  except 
indirectly,  as  a  pension  system  may  be  considered  a  type 
of  social  insurance,  and  in  certain  cases  of  life  insurance. 
No  one  questions  the  wisdom  of  this  as  concerns  soldiers 
or  as  regards  the  pensioning  of  civil  servants;  but  munic- 
ipal fire  insurance  abroad  has  not  always  proved  success- 
ful, and  in  the  United  States  the  great  private  companies 
in  both  life  and  fire  insurance  seem  to  have  met  our  needs, 
though  it  has  been  thought  wise  to  put  them  under  gov- 
ernmental control — many  thinking  the  control  at  the 
present  time  unwisely  rigid. 


14 


MEASURES.  —  Tht  war,  however,  has  led  our 
ernment  to  undertake  marine  insurance.  In  an  emer- 
gency, as  a  war  measure,  it  need  not  be  questioned.  As  a 
permanent  policy,  on  what  principle  should  it  be  retained? 

In  this  time  of  war  the  English  Government  has  gone 
very  far.  It  declared  a  moratorium  on  debts  to  safeguard 
the  national  finances,  then  it  promptly  issued  a  new  cur- 
rency, based  not  upon  gold  reserves  but  upon  the  credit 
of  the  State  —  a  startling  innovation  for  England.  Again, 
the  State  guaranteed  the  Bank  of  England  against  loss 
that  it  might  incur  in  discounting  bills  of  exchange  either 
home  or  foreign,  bank  or  trade,  accepted  prior  to  August  4, 
1914.  It  guaranteed  war  risks  on  wheat  and  flour  shipped 
from  Atlantic  ports  under  existing  contracts,  and  further, 
assumed  80  per  cent  of  the  war  risks  on  vessels  leaving 
port  after  the  war  began.  The  intention  was,  as  the 
Chancellor  of  the  Exchequer  declared,  ato  secure  that 
our  vast  oversea  trade  will  go  on  and  avoid  an  undue 
enhancement  of  prices  and  of  food  and  raw  materials  for 
producing  industries."  The  interference  in  business  in 
England,  on  account  of  the  war,  has  gone  much  further 
still  in  some  cases,  until  it  amounts  practically  to  cor- 
nering the  sugar  market,  to  taking  over  certain  industries 
if  interfered  with  on  account  of  their  ownership  by  for- 
eigners, the  immediate  control  of  the  railroads  by  the 
Government  for  military  purposes,  and  so  on.  These 
acts  are  accepted  without  question  as  war  measures  and 
are  therefore  not  to  be  discussed.  As  examples  of  a  ten- 
dency in  our  own  country  in  times  of  peace  along  some- 
what similar  lines,  we  find  some  of  our  states  insuring 
bank  deposits  and  some  of  our  statesmen  wishing  to  havo 
the  system  widely  extended.  No  one  doubts  that  busi- 
ness should  be  protected  under  general  governmental  rules, 
but  how  far?  And  when  a  Government  guarantees,  should 
it  also  manage? 


15 

EDUCATION. 

Americans  have  had  reason  to  be  proud  of  their  edu- 
cational system,  but  our  practice  in  this  field  also  raises 
many  questions  regarding  Government  management. 
Practically  every  one  assents  to  free  elementary  education. 
In  most  of  our  states  a  free  high  school  education  is 
given  and  accepted  without  thought.  In  most  of  our  Mid- 
dle Western  states,  the  State  Universities  furnish  sub- 
stantially a  free  education  to  any  extent  required,  even 
training  a  man  in  his  profession  to  earn  his  living,  as 
lawyer,  or  doctor,  or  dentist.  I  belonged  for  some  years 
to  an  institution — chiefly  privately  endowed,  however — 
that  had  for  its  motto :  "I  would  found  an  institution  in 
which  any  person  may  receive  instruction  in  any  study." 
Personally,  I  see  no  reason  why  our  universities  should 
not  give  technical  training  in  horseshoeing,  or  shoemaking, 
or  any  other  line  of  industry,  but  I  seriously  question 
whether  technical  training  should  be  given  free  of  tuition 
in  either  state  or  privately  endowed  universities. 

TECHNICAL  TRAINING. — The  dean  of  one  of  our  schools 
of  commerce  in  the  Middle  West  said  the  other  day  that  a 
student  whose  tuition  was  paid  for  him  by  his  employer, 
who  required  him  to  study  the  principles  of  business, 
was  likely  to  fail.  The  dean  believed  that  a  fairly  high 
tuition  should  be  charged  not  only  for  financial  reasons 
but  for  the  excellent  effect  upon  the  students  themselves. 
A  teacher  who  leaves  an  ordinary  college  to  which  young 
men  are  sent  by  their  parents  to  get  an  education,  to 
teach  in  an  institution  where  young  men  send  themselves 
for  evening  work  after  a  day  spent  in  business,  paying 
their  own  expenses,  is  immediately  struck  with  the  excel- 
lent high  quality  of  the  students  and  the  serious  work  in 
the  latter  institution.  Are  our  states  going  too  far  in 
the  way  of  giving  technical  education?  Wrhere  shall  we 
draw  the  line? 

But  besides  furnishing  all  kinds  of  education  under 
Government  management,  we  even  compel  children  to  take 


16 

an  education.  Still  further,  the  public,  at  its  own  expense, 
if  need  be,  carries  them  to  the  school  house  in  order  to 
give  them  the  required  training,  willy-nilly.  In  1913 
Greater  New  York  expended  $106,495.29  to  pay  for  trans- 
portation of  children.  For  1914,  New  York  City  is  mak- 
ing provision  in  its  budget  to  expend  $119,000  for  carrying 
children  by  street  cars,  omnibuses — whatever  means  best 
meets  the  need — from  their  homes  to  the  school  in  places 
where  the  school  houses  are  too  distant  for  them  to  walk. 

In  the  most  "advanced"  school  systems  of  to-day  all 
children  are  examined  free  of  charge  to  detect  defective 
eyesight,  adenoids,  dental  needs,  mental  capacity.  In 
needy  cases,  adenoids  are  removed  without  charge  and 
spectacles  fitted,  to  be  paid  for  by  charitable  societies, 
while  luncheons  are  furnished  at  cost;  and  many  princi- 
pals recommend  that  they  be  supplied  free  and  that  more 
than  one  meal  be  given.  Playgrounds,  recreation  piers 
and  dances  are  supplied  free  now.  Shall  we  go  further? 
I  am  now  not  objecting  to  these  things.  I  merely  inquire, 
Is  there  danger  of  carrying  this  too  far?  Will  the  poor 
children  get  health  at  the  expense  of  feeling  like  paupers? 
Or  can  we  find  some  other  way  of  giving  them  strength? 
And  if  we  are  not  doing  too  much  for  little  children,  shall 
we  compel  the  taxpayers  also  to  give  men  from  20  to  40 
years  of  age  the  training  to  become  engineers  or  dentists 
or  bankers  or  accountants?  And  how  far  shall  we  go  to 
amuse  them?  Shall  we  do  even  more?  If  so,  why?  Is 
it  best  for  the  taxpayers?  Is  it  even  best  for  the  men 
themselves? 

We  ought  not  to  let  our  judgment  be  warped  in  the 
discussion  of  public  questions  by  our  sympathy  with  little 
children,  or  with  the  poor.  Clear  thinking  and  sane  judg- 
ment does  not  harden  the  heart,  but  tender  feeling  without 
clear  thinking  and  judgment  is  a  chief  cause  of  many 
grave  social  abuses.  Let  us  note  that  we  are  in  fact 
getting  far  beyond  the  educational  field  in  our  public 
.work. 


17 

AID  TO  FARMERS. — Are  our  states  going  too  far  in  help- 
ing our  farmers  by  showing  them  without  charge  how 
to  run  their  farms?  Or  by  showing  their  wives  and 
daughters  how  to  sew  and  bake,  and  feed  the  babies  in  a 
sanitary  way  and  how  to  kill  bedbugs  most  effectively? 
And  our  Government  does  all  these  things.  If  farmers  are 
to  be  helped,  why  not  help  mechanics  in  the  same  way? 
And  is  it  best  to  aid  any  of  these  classes  without  definite, 
considerable  direct  contribution  on  their  part? 

This  whole  question  of  public  help,  including  education, 
might  seem  outside  our  topic,  were  it  not  for  the  fact 
that  state  management  of  business  seems,  in  the  judg- 
ment of  some,  to  have  almost  invariably  a  strong  element 
of  lack  of  efficiency  which  moves  us  to  ask  for  a  guiding 
principle,  and  public  education  is  collateral  in  that  regard. 
Moreover,  have  we  any  other  Government-managed  fac- 
tory so  important  as  the  one  in  which  we  aim  to  produce 
citizens? 

Reports  from  workingmen's  sources  claim  that  the 
so-called  social  insurance  of  workingmen  in  England  is 
sapping  the  foundations  of  independence  of  character  of 
the  English  workingmen,  and  that  the  workingmen  are 
losing  in  consequence  vastly  more  than  they  have  gained. 
It  is  important  that  a  right  decision  be  reached. 

PUBLIC  UTILITIES. — The  question  of  municipal  utilities 
— whether  they  shall  be  owned  and  managed  by  the 
municipality  or  by  private  companies  under  municipal 
control — has  been  much  discussed  of  late  and  the  literature 
of  the  subject  is  abundant.  I,  therefore,  pass  this  over 
with  simply  the  statement  that  many  countries  have  gone 
far  in  taking  municipal  utilities  into  Government  hands 
and  that  the  tendency  seems  strong  in  that  direction,  and 
with  the  question :  What  are  to  be  the  guiding  principles? 
Better  service?  Cheaper  service?  Even  free  service? 
Revenue?  But  whatever  the  principle  may  be,  the  actual 
facts  should  be  known.  If  we  are  to  compare  costs,  let 


18 

us  have  identical  systems  of  cost  accounting.  Do  any  of 
our  municipal  utilities  charge  rent  or  depreciation  for 
the  City  Hall,  salaries  of  mayor  and  aldermen  and  similar 
expenses  as  part  of  their  overhead?  Ought  they  to  do  so 
in  order  to  make  fair  comparisons  with  private  establish- 
ments? If  the  question  is  service  on  street  railways,  let 
us  know  whether  the  people  prefer  a  seat,  or  to  wait  for 
half  an  hour  before  they  get  a  ride,  as  I  have  more  than 
once  done  in  Paris  and  other  Continental  cities. 

If  the  Government  is  to  take  the  telephone  and  tele- 
graph— why?  For  better  service?  For  cheaper  service? 
For  the  effect  upon  the  people  in  the  way  of  protection? 
We  must  seek  a  guiding  principle  and  we  must  be  sure  of 
our  facts. 

That  the  tendency  is  at  the  present  day  strongly 
toward  increasing  the  field  of  Government  management  is 
clear.  It  is  by  no  means  yet  clear  how  far  it  is  wise  to 
go  in  that  direction,  and  we  are  still  more  in  the  dark 
as  to  the  clean-cut  principles  on  which  decisions  should 
be  reached,  and  as  to  the  actual  facts  of  existing  condi- 
tions so  gathered  that  the  experiences  of  different  sys- 
tems are  clearly  comparable. 

Let  it  not  be  thought,  because  I  raise  these  questions, 
that  I  am  opposed  to  the  Government  doing  these  things, 
or  many  of  them.  On  the  basis  of  our  present  very  imper- 
fect knowledge  I  am  opposed  to  its  doing  some  of  them. 
Until  we  can  get  a  better  system  of  cost  accounting,  so 
that  we  can  know  who  it  is  that  pays  the  cheap  rate  on 
parcels,  I  am  opposed  to  any  further  extension  of  the 
parcels  post.  I  favor  our  postal  savings  bank.  But 
1  am  very  positively  of  the  opinion  that  the  State  ought 
to  undertake  nothing  without  very  careful  consideration 
of  the  principles  on  which  it  is  acting,  and  without  accu- 
rate, definite  knowledge  of  the  facts  by  which  it  should 
be  guided, 


19 


WHAT  SHALL  THE  GOVERNMENT 
OWN  AND  OPERATE? 

JONATHAN  BOURNE,  Jr. 

The  desideratum  of  all  government  should  be  the 
protection  of  its  citizens  and  only  such  restraint  of  indi- 
vidual action  as  is  absolutely  necessary  to  insure  the 
desired  protection  of  all  its  citizens. 

The  limit  of  the  individual's  restraint  should  be 
clearly  expressed  by  law  and  not  left  to  the  whim  or  fancy 
of  an  executive,  a  commission,  a  department  or  bureau. 

A  government  of  rule  and  regulation,  a  bureaucratic 
government  such  as  ours  is  rapidly  tending  toward,  can- 
not long  endure. 

I  am  strongly  opposed  to  government  ownership  of 
railroads  because  of  the  following  three  objections: 

First:  The  fundamental  objection  that  it  would  be 
absolutely  destructive  of  popular  and  representative 
government ; 

Second:  The  unanswerable  objection  that  government 
ownership  necessitates  government  regulation;  that  the 
failure  of  government  regulation  necessitates  the  failure 
of  government  ownership ;  that  the  success  of  government 
regulation  eliminates  the  necessity  or  desirability  of  gov- 
ernment ownership; 

Third:  The  economic  objection  that  government 
ownership  would  be  more  dilatory,  less  efficient  and  far 
more  costly  to  the  people  of  the  country. 


20 

SELF-INTEREST  GOVERNS  DELIBERATED 
ACTION. 

All  government,  society  and  business  are  composed  of 
human  units  and  directed  by  the  forces  controlling  human 
action.  Hence,  in  approaching  governmental  problems, 
we  should  carefully  analyze  these  forces.  Where  any  indi- 
vidual is  called  upon  for  immediate  action  many  forces, 
such  as  sentiment,  love,  passion  or  hatred,  may  determine 
the  action.  I  am  convinced  that  every  deliberated  action 
of  any  individual  in  his  primary  capacity  is  controlled 
or  influenced  by  the  individual's  opinion  as  to  the  effect 
such  action  will  have  upon  his  own  selfish  interests.  If 
this  be  true,  then  the  least  power  delegated  to  single  indi- 
viduals in  government  the  better  for  the  interests  of  those 
governed. 

There  are  no  two  people  in  the  world  exactly  alike  and 
probably  there  never  will  be.  Hence  each  individual  has 
a  different  viewpoint  as  to  what  constitutes  his  own  selfish 
interest.  Under  community  action  no  individual  can  secure 
gratification  of  his  own  selfish  desire,  but  must  rest  con- 
tent with  what  the  majority  of  the  community  believe  to 
be  for  the  best  interest  of  all.  Therefore,  the  more  you 
force  the  people  to  act  collectively,  the  more  you  can  dis- 
tribute governmental  power,  the  better  the  general  wel- 
fare of  the  community  governed. 

In  all  organized  society  there  are  three  great  forces 
continually  struggling  for  supremacy:  the  police  force  of 
government,  the  religious  force  and  commercial  force.  The 
best  government  would  be  correlated  action  between  these 
forces,  but  with  domination  of  the  police  force  over  the 
religious  and  commercial  forces. 

The  people  as  a  whole  and  not  any  individual  should 
constitute  the  police  force  of  government.  No  individual 
should  constitute  a  government.  Our  whole  political 
organization  is  founded  on  this  idea;  and  yet  the  present 
trend  of  this  country,  or  at  least  of  the  present  adminis- 


21 

tration  and  some  previous  ones,  has  been  towards  cen- 
tralized government,  with  practically  plenary  powers  in 
the  hands  of  the  executive,  or  department  or  bureau  heads. 

The  evil  results  of  the  police  force,  commonly  called 
the  State,  being  represented  or  dominated  by  a  single 
individual  are  today  most  forcefully  and  horribly  illus- 
trated in  the  European  situation  where  one  man  by  virtue 
of  his  occupancy  of  a  throne  has  involved  four  hundred 
million  people  in  a  continental  war  resulting  in  the 
slaughter  of  millions  of  men,  the  destruction  of  billions 
of  dollars'  worth  of  property,  and  cessation  of  industrial 
activities  with  resultant  economic  waste  beyond  human 
comprehension.  Had  the  policies  of  European  nations 
been  left  to  legislative  bodies  rather  than  to  individual 
monarchs  the  situation  which  now  exists  could  not  have 
been  developed. 

Selfishness  and  ambition  so  generally  control  human 
action  that  great  delegated  power  must  always  be  a  menace. 
It  is  certainly  axiomatic  that  centralized  power  in  an 
individual  or  commission  can  only  produce  results  com- 
mensurate with  the  integrity,  ability,  experience  and  un- 
selfishness of  the  individual  or  individuals  constituting  the 
commission. 

GOVERNMENT  OWNERSHIP  MEANS  CENTRAL- 
IZED  POWER. 

Returning  to  my  first  objection  to  government  owner- 
ship of  railroads,  I  assert  that  it  would  be  absolutely 
destructive  of  popular  and  representative  government. 
The  ownership  of  railroads  would  be  quickly  followed  by 
ownership  of  telegraph  and  telephone  lines,  express  com- 
panies, water  transportation  companies  and  electric  rail- 
ways doing  an  interstate  business.  I  am  opposed  to  gov- 
ernment ownership  of  any  of  these  public  service  cor- 
porations. 

I  present  herewith  a  tame  I  have  prepared  giving  the 
number  of  employees,  for  the  years  specified,  of  the  United 


22 


States  Government  and  of  the  different  public  service  cor- 
porations, showing  a  total  of  3,054,988  employees : 

1914,  number  of  government  civil  service  employees 469,000 

1912,  telephone  and  telegraph  employees 220,656 

1913,  railway  employees ~ 1,815,239 

1912,  electric  and  street  railway  employees 282,461 

1906,  water  transportation 188,348 

1907,  express  employees 79,284 


Total 3,054,988 

Eeflect  over  these  figures.  Bemember  that  in  the  last 
ten  presidential  elections  the  President  has  been  chosen 
by  a  plurality  varying  from  a  little  over  7,000  to  about 
two  and  a  half  millions.  Can  any  persons  familiar  with 
the  politics  of  this  country  doubt  the  correctness  of  the 
assertion  that,  under  government  ownership  of  these  pub- 
lic service  corporations,  with  the  resultant  addition  of 
over  two  and  a  half  million  employees  to  the  government 
pay  roll,  those  employees  and  their  friends  would  inevita- 
1  bly  control  the  government  under  our  political  machinery? 
The  tendency  would  be  more  pay  and  less  service  in  gov- 
ernmental employment,  resulting  in  ceaseless  efforts  on 
the  part  of  outside  labor  to  secure  government  employ- 
ment because  less  onerous  and  more  remunerative,  with 
cumulative  dissatisfaction  and  irritation  in  all  private 
enterprise. 

In  the  past,  presidents  have  been  able  to  dictate  the 
nomination  of  their  would-be  successors,  either  themselves 
or  others,  because  of  subservience  to  the  executive  of  the 
great  number  of  Federal  office  holders.  While  it  is  true 
that  universal  adoption  of  presidential  primaries  would 
minimize  the  possibility  of  repetition  of  this*  misuse  of 
power  in  the  future,  yet,  even  under  a  primary  system, 
the  existence  of  over  threfe  million  employees,  subject  to 
removal,  promotion,  transfer  or  demotion  by  executive 
order,  would  give  a  political  power  that  should  not  be 
delegated  to  any  single  individual  if  the  government  is 
»to  last. 


23 


WOULD  THROW  RAILROADS  INTO  POLITICS.^ 

Advocates  of  government  ownership  urge  that  the  tak- 
ing over  of  the  railroads  by  the  government  would  elimi- 
nate them  from  politics.  In  my  opinion,  it  would  have 
the  opposite  effect,  throwing  them  into  politics. 

The  assertion  that  the  railroads  are  now  a  positive 
factor  in  politics  is  untrue.  Undoubtedly  there  was  a 
time  when  railroads  and  other  large  corporations  exerted 
a  very  large  and  very  effective  influence  upon  state  and 
national  politics,  but  that  time  has  passed.  The  Direct 
Primary  has  overthrown  the  power  the  corporations  had 
under  the  old  convention  system  and  the  people  have  the 
power  to-day  not  only  to  select  between  candidates,  but 
to  choose  the  candidates  as  well. 

Goyernment  ownership  would  be  followed  by  organi- 
zation  of  government  employees  for  the  promotion  of  their 
own  interests.  These  employees  would  immediately  become 
an  organized  factor  in  every  campaign.  Their  influence 
would  be  exerted,  not  primarily  for  the  promotion  of  the 
best  interests  of  the  country,  but  for  the  promotion  of 
their  own  interests.  Their  influence  would  be  thrown  with 
the  party  or  candidate  that  promised  most  for  the  fulfill- 
ment of  their  desires. 

So  long  as  the  party  in  power  kept  on  good  terms  with 
the  three  million  government  employees,  it  would  have 
their  support,  and  the  support  and  co-operation  of  their 
relatives.  While  it  would  be  absurd  to  argue  that  any 
such  body  of  men  would  act  as  a  unit  at  all  elections,  it  is 
altogether  probable  tha^  sufficient  number  of  them  would 
so  act  as  to  make  them  a  formidable  political  organization. 

An  administration  backed  by  an  active  organization 
spread  throughout  the  length  and  breadth  of  the  country 
would  ttereby  have  a  tremendous  and  practically  over- 
whelming advantage  over  the  party  seeking  to  supplant  it. 

The  establishment  of  classified  civil  service  rules  and 
regulations  would  not  remove  the  menace  to  truly  repre- 


24 

eentative  government.  Even  though  appointments  be 
made  in  part  in  accordance  with  competitive  tests,  the 
fact  that  chief  officers  of  the  party  in  power  have  control 
over  promotions,  demotions,  transfers  and  removals, 
would  make  the  individual  governmental  employee  sub- 
servient in  politics,  except  where  practically  the  whole 
body  of  employees  acted  in  accordance  with  prearranged 
plans  for  the  benefit  of  the  employees  themselves. 

DISTRIBUTION  PREFERABLE  TO 
CENTRALIZATION. 

Our  government  was  founded  upon  the  principle  of 
distribution,  rather  than  centralization  of  power.  The 
framers  of  the  American  constitution  provided  for  three 
branches  of  government,  the  legislative,  executive  and 
judicial.  The  legislative  branch,  composed  of  a  large  num- 
ber of  individuals,  was  designed  to  be  the  dominant  branch, 
for  it  was  vested  with  the  law-making  power.  The  judicial 
branch  was  designed  to  interpret  and  the  executive  branch 
to  execute  the  laws  enacted  by  Congress. 

But  in  practice  we  have  drifted  far  from  the  principles 
adopted  when  the  government  was  founded.  Ours  is  a 
representative  form  of  government,  generally  conceded  to 
be  the  best  thus  far  evolved  by  the  brains  of  men,  because 
it  is  a  government  of,  for  and  by  the  people.  Yet,  especially 
in  the  past  two  years,  our  tendency  has  been,  in  my  opinion, 
entirely  contradictory  of  the  theory  upon  which  our  gov- 
ernment was  constructed,  and,  unless  checked,  must  result 
in  absolute  destruction  of  representative  government. 

Some  political  leaders  seem  to  have  gone  commission 
mad.  Every  social  and  economic  problem,  in  their  view, 
calls  for  the  creation  of  a  new  bureau  or  department  or 
commission  with  power  to  make  rules  and  regulations  for 
the  government  of  the  American  people.  Congress,  the 
legislative  body  of  the  constitution,  is  becoming  but  an 
instrumentality  for  the  creation  of  bureaus  and  commis- 
sions vested  with  the  real  law-making  power.  The  citizen 


25 

of  to-day  who  wishes  to  know  what  he  can  or  cannot  do 
within  the  law,  consults  not  merely  the  statute  books,  but 
the  latest  pamphlets  of  rules  and  regulations  adopted  by 
some  department  or  bureau  head  or  commission. 

While  I  believe  the  Interstate  Commerce  Commission 
has  accomplished  and  is  accomplishing  much  good;  have 
favored  its  receiving  the  power  to  regulate  railroad  rates ; 
yet  I  realize  that  it  is  yet  to  be  demonstrated  whether  the 
powers  it  already  has  should  be  enlarged  or  curtailed,  and 
I  am  appalled  at  the  realization  that  the  legislation  of 
the  past  two  years  has  so  centralized  government  as  to 
place  the  interstate  business  of  this  country  practically 
in  the  hands  of  nineteeen  men,  or  possibly  of  eleven;  the 
Interstate  Commerce  Commission,  consisting  of  seven 
members,  or  a  majority  of  four,  practically  determining 
rates  affecting  the  welfare  of  the  whole  nation ;  the  Federal 
Reserve  Board,  consisting  of  seven  members,  or  a  majority 
of  four,  practically  determining  currency  expansion  or 
contraction  affecting  all  business  of  the  country;  the 
Trade  Commission,  consisting  of  five  members,  or  a  ma- 
jority of  three,  that  will  practically  dictate  the  policies  of 
160,000  of  the  large  corporations  of  this  country,  with  the 
inevitable  result  that  attempts  will  be  made  to  use  these 
boards  as  political  machinery  for  the  advantage  or  dis- 
advantage of  some  administration  and  ultimately  of  some 
individuals., 

REGULATION  NECESSARY  UNDER  GOVERNMENT 
OWNERSHIP. 

Proceeding  now  to  a  consideration  of  my  second 
objection : 

It  is  strange  that  the  advocates  of  government  owner- 
ship, who  assert  the  failure  of  government  regulation, 
overlook  the  fact  that  government  regulation  is  just  as 
essential  under  government  ownership  as  it  is  to-day.  If 
the  Interstate  Commerce  Commission  must  be  charged 
with  the  duty  of  regulating  rates,  supervising  provisions 


26 

for  protection  of  life,  and  guarding  against  favoritism  and 
discrimination,  surely  all  these  duties  must  be  performed 
under  government  ownership. 

The  conflicting  interests  of  competing  shipping  points 
would  exist  under  government  ownership  just  as  they 
exist  to-day. 

Every  section  of  the  country  and  every  industry  would 
be  before  the  managing  board  of  the  government  railway 
system  asking  for  reduced  rates  on  certain  commodities, 
or  between  certain  points. 

Every  community  would  be  before  the  Board  asking 
for  improved  service,  improved  equipments  and  extension 
of  lines. 

Where  the  Interstate  Commerce  Commission  has  one 
problem  to  solve  now,  it  would  have  ten  under  govern- 
ment ownership. 

It  cannot  be  expected  that  discrimination  will  be  elimi- 
nated under  government  ownership.  Those  who  anticipate 
any  such  reform  need  only  recall  the  serious  differences 
that  have  arisen  already  in  the  Federal  Reserve  Board 
over  the  effort  of  the  Secretary  of  the  Treasury  to  extend 
special  favors  in  financial  matters  to  one  section  of  the 
United  States. 

DISCRIMINATION  IN  GOVERNMENT  SERVICE. 

Another  proof  that  we  would  have  discrimination — 
unfair  discrimination — under  government  ownership,  may 
be  found  in  the  records  of  the  Post-Office  Department, 
where  such  discrimination  has  been  practiced.  In  1910 
Postmaster-General  Hitchcock  ordered  the  establishment  of 
what  is  known  as  the  "Blue  Tag  Service,"  under  which 
certain  publications  were  ordered  transported  on  freight 
trains  while  rival  publications  of  very  similar  character 
and  competing  for  the  same  trade  were  continued  in  the 
mails. 


27 


Please  remember  that,  although  these  magazines 
which  were  ordered  transported  on  freight  trains  paid 
exactly  the  same  rate  of  postage  and  were  admitted  to 
the  mails  under  exactly  the  same  laws  as  those  that  were 
continued  on  fast  mail  trains,  yet  they  received  under  the 
Postmaster-General's  deliberate  order  a  far  less  efficient 
character  of  service. 

When  such  a  discrimination  can  be  made  in  the  postal 
service,  who  can  doubt  that  there  would  be  similar  dis- 
crimination under  government  ownership  and  operation  of 
the  railroads? 

Government  ownership  of  telegraph  and  telephone 
lines  would  result  in  intermittent  press  censorship  and 
continuous  press  subservience  to  the  administration  in 
power,  thereby  utterly  destroying  our  zealously  guarded 
"freedom  of  the  press." 

Discriminations  no  doubt  exist  to  some  extent  to-day, 
but  they  have  been  reduced  to  a  minimum.  The  point  I 
wish  to  impress  upon  your  minds  is  that  government 
ownership  would  not  relieve  the  country  of  the  necessity 
of  a  government  regulation. 

If  government  regulation  is  a  failure  to-day,  we  have 
no  good  reason  to  believe  it  would  be  a  success  under  gov- 
ernment ownership.  We  cannot  hope  to  secure  for  the 
management  of  a  government-owned  railroad  system  men 
who  are  more  honest  or  more  capable  or  more  aggressive 
in  the  performance  of  their  duty  than  are  the  members 
of  the  Interstate  Commerce  Commission  and  the  officers 
of  the  Department  of  Justice. 

If  they  cannot  succeed  in  enforcing  the  law  and  in  pre- 
venting discrimination,  we  cannot  expect  them  to  estab- 
lish and  maintain  equitable  service  under  government 
ownership. 

If  a  member  of  the  President's  cabinet  will  undertake 
to  favor  one  section  of  the  United  States  in  the  operation 
of  a  Currency  and  Banking  Law,  some  other  member  of 


28 


the  President's  cabinet  would  attempt  to  favor  some  sec- 
tion of  the  country  in  the  management  of  government  rail- 
roads under  his  control. 

Therefore,  I  assert  again,  that  if  government  regula- 
tion is  a  failure,  government  ownership  will  be  a  failure, 
and  if  government  regulation  is  a  success,  the  reason  for 
government  ownership  is  eliminated. 

GOVERNMENT  SERVICE  MORE  EXPENSIVE. 

The  economic  objection  to  government  ownership  is  the 
one  I  deem  of  least,  and,  in  fact,  of  very  slight  relative 
importance.  I  am  not  one  of  those  who  think  that  gov- 
ernment ownership  would  lead  to  financial  disaster,  or 
ruin  of  the  transportation  service,  or  the  destruction  of 
internal  commerce.  I  have  no  doubt  whatever  that  the 
government  could  acquire  the  railroads,  operate  them  with 
a  fair  degree  of  success,  inaugurate  some  reforms  and  save 
some  waste  through  the  elimination  of  duplication.  But 
I  am  also  convinced  that  while  the  government,  as  the 
owner  and  operator  of  the  railroads,  would  likely  inaugu- 
rate improvements  in  some  respects,  these  wrould  be  more 
than  offset  by  deterioration  in  the  service  in  other  ways, 
and  that  the  economies  accomplished  by  elimination  of 
duplication  would  be  more  than  counterbalanced  by  in- 
creased expenses  in  other  respects. 

It  seems  to  me  to  be  absurd  to  argue,  as  some  gentle- 
men do,  that  the  government  could  take  over  the  railroads, 
provide  better  equipment,  install  the  most  up-to-date  and 
expensive  appliances  for  the  protection  of  employees  and 
passengers,  increase  the  wages  and  reduce  the  hours  of 
employees,  and  at  the  same  time  give  service  as  good  as 
now  rendered  at  a  less  cost. 

That  every  practicable  precaution  should  be  taken  for 
the  protection  of  life,  no  one  will  question.  This,  as  I 
understand  it,  the  Interstate  Commerce  Commission  now 
has  the  power  to  require.  I  have  no  doubt  whatever  that 


29 


it  has  ordered  the  installation  of  protective  equipment  as 
rapidly  as  it  is  deemed  practicable. 

Undoubtedly  there  is  some  waste  in  the  present  sys- 
tem of  management  because  competing  roads  maintain 
more  frequent  train  service  than  is  necessary  between  cer- 
tain points,  through  an  effort  on  the  part  of  each  to  secure 
as  large  a  share  as  possible  of  the  traffic.  The  elimination 
of  some  of  the  trains  would  mean  a  somewhat  reduced 
service,  a  correspondingly  reduced  cost  and  a  consequent 
saving.  I  cannot  agree,  however,  with  those  who  believe 
that  this  reduction  in  service,  due  to  the  elimination  of 
competition,  and  reduction  of  supervisory  organization  in 
the  management  due  to  the  consolidation  of  all  the  railway 
systems  into  one,  would  effect  any  economy  whatever, 
when  allowance  is  made  for  the  increased  number  of 
employees  incident  to  government  ownership.  That  it 
costs  the  government  more  to  perform  service  than  it  does 
a  private  concern  is  so  generally  recognized  that  it  requires 
no  demonstration. 

Under  present  conditions,  passenger  and  freight  rates 
are  practically  uniform  on  competing  lines  and  the  only 
competition  is  in  the  matter  of  service.  The  effort  of  the 
managers  is  to  secure  a  larger  portion  of  the  traffic  by 
providing  superior  facilities  and  rendering  superior  serv- 
ice. With  the  elimination  of  competition  under  govern- 
ment ownership,  this  incentive  would  be  entirely  removed. 
At  the  present  time,  every  employee  is  urged  by  his  superi- 
ors and  compelled  by  his  own  desire  to  retain  his  position 
and  secure  promotion  by  demonstrated  ability,  to  put  forth 
every  effort  to  secure  business  for  his  company  by  offering 
the  traveler  and  the  shipper  the  best  service  practicable. 
Under  governmental  ownership  that  incentive  would  be 
removed.  The  employee  would  perform  his  routine  service 
with  faithfulness,  no  doubt,  but  without  putting  forth 
unusual  effort. 

One  of  the  arguments  made  in  behalf  of  government 
ownership  is  that  it  would  mean  increased  compensation 


30 

to  railroad  employees.  That  this  result  would  be  realized, 
no  one  will  question,  nor  shall  I  assert  that  it  ought  not 
be  realized.  What  I  do  contend  is  that  the  advocates  of 
government  ownership  who  base  their  arguments  upon 
economic  reasons,  err  in  their  contention  that  the  govern- 
ment can  both  increase  compensation  of  employees  and 
reduce  the  cost  of  transportation  to  the  shipper. 

The  average  compensation  of  the  present  railway  em- 
ployee is  about  $723  per  annum.  The  lowest  salary  paid 
to  the  railway  mail  clerk  during  the  first  year  of  his 
employment,  when  he  is  performing  practically  unskilled 
service,  is  $900  per  year.  The  average  compensation  of 
the  railway  employee  is  therefore  below  the  least  compen- 
sation of  railway  mail  clerks  in  the  employ  of  the  gov- 
ernment. 

If  the  average  compensation  of  railway  employees 
should  be  increased  one-third,  which  is  a  very  conservative 
estimate  of  the  increase  that  would  be  experienced  under 
government  ownership,  the  total  addition  to  the  compen- 
sation account  would  be  $400,000,000  annually — the  pres- 
ent pay  roll  of  the  railroads  amounting  to  over  $1,200,- 
000,000  in  round  numbers. 

GOVERNMENT  SERVICE  LESS  EFFICIENT. 

My  assertion  that  government  ownership  would  be  less 
efficient  is  based  to  a  large  extent  upon  a  personal  experi- 
ence I  had  some  four  years  ago.  On  December  21,  1910, 
by  the  adoption  of  a  resolution  which  I  introduced,,  the 
Senate  called  upon  the  President  to  inform  the  Senate  as 
to  the  total  number  of  officers  and  employees  of  the  gov- 
ernment, exclusive  of  enlisted  men  of  the  army  and  navy. 
Sixty-five  days  elapsed  before  the  information  was  trans- 
mitted to  the  Senate,  it  being  received  on  the  evening  of 
February  24,  1911. 

While  waiting  for  the  receipt  of  this  information  I 
became  curious  to  know  how  long  it  would  take  large  cor- 
porations to  supply  similar  information  regarding  their 


31 

own  service.  I  therefore  addressed  letters  to  the  Standard 
Oil  Company,  United  States  Steel  Company,  and  the 
Western  Union  Telegraph  Company  asking  them  how  long 
it  would  take  them  to  supply  the  information.  The  Stand- 
ard Oil  Company  replied  that  it  could  supply  the  infor-* 
mation  in  three  days;  the  Western  Union  could  supply  it 
within  a  few  days.  I  received  no  response  from  the  United 
States  Steel  Company. 

It  was  a  cause  of  great  surprise  to  me  that  it  should 
take  the  departments  of  the  Government,  all  located  in 
Washington,  sixty-five  days  to  inform  the  Senate  as  to  the 
number  of  their  employees,  when  all  appointments  are 
made  from  Washington  and  all  pay  rolls  audited  there. 

The  Post-Office  Department  and  its  service  is  frequently 
lauded,  especially  by  Postmasters-General  and  their  assist- 
ants, for  its  efficiency  and  economy.  Let  us  analyze :  mail 
is  deposited  by  citizens  in  post-offices  and  letter  boxes, 
picked  up  by  postal  employees,  carried  to  assembling 
points,  routed  for  destinations,  delivered  to  privately 
owned  railroads,  transported  by  them  all  over  the  coun- 
try; received  by  postal  employees  and  distributed  in  post- 
office  boxes  or  by  carriers  to  the  addresses.  Could  this 
service  be  performed  without  the  privately  owned  rail- 
roads? Is  the  Post-Office  Department  entitled  to  sole 
credit  for  this  activity?  Are  not  the  railroads  entitled  to 
some  credit  for  safe  and  expeditious  transportation  all 
over  the  country,  especially  when  public  opinion  compels 
them  to  carry  the  mail,  and  at  rates  which  I  am  satisfied 
after  two  years'  special  study  of  the  subject  are  too  low? 

I  have  no  desire  to  minimize  the  credit  due  the  postal 
mail  collectors,  clerks  and  distributers,  yet  comparison 
with  large  mail  order  houses,  where  I  have  known  a  mail 
order  for  twelve  different  articles  from  eight  different 
departments  to  be  filled,  with  the  packages  on  the  plat- 
form at  the  car  within  four  hours  from  the  time  of  the 
receipt  of  the  letter  containing  the  order,  shows  an  effi- 
ciency and  organization  in  the  mail  order  house  that  does 


32 

not  exist  in  the  postal  department,  because  of  better  execu- 
tive direction  in  the  former  than  exists  in  the  latter. 

The  head  of  a  mail  order  house  or  other  large  business 
establishment  engaged  in  distribution  devotes  his  time  to 
increased  efficiency,  better  service  and  intelligent  econo- 
mies, while  a  Postmaster-GeneraPs  time  is  too  apt  to  be 
consumed  in  an  effort  to  build  up  a  political  organization 
by  the  distribution  of  nearly  60,000  post-offices  among 
the  faithful  followers  of  the  administration. 

Successful  private  business  is  run  on  the  merit  and  pro- 
motion plan,  while  we  are  prone  to  run  the  government  on 
the  demerit  and  demotion  basis. 

STATISTICS  UNRELIABLE. 

In  this  discussion  I  make  very  little  use  of  statistics, 
for  it  has  been  my  observation  and  experience  that  statis- 
tics are  very  unreliable  and  are  very  likely  to  be  mislead- 
ing, even  when  used  with  the  best  of  intentions.  Statistics 
are  quite  frequently  derived  from  a  prejudiced  source  and 
usually  selected  and  used  to  support  preconceived  ideas. 

Let  me  elaborate  a  little  on  my  statement  that  I  have 
found  statistics  unreliable. 

You  will  all  remember  that  the  Postmaster-General  of 
the  last  administration  declared  in  his  last  annual  report 
that  he  had  succeeded  in  placing  the  Post-Office  Depart- 
ment on  a  self-supporting  basis  and  had  a  surplus  of 
$219,000  as  proof.  The  first  report  of  his  successor,  the 
Postmaster-General  of  the  present  administration,  chal- 
lenged this  statement  and  asserted  that  the  apparent  sur- 
plus was  produced  by  a  "faulty  method  of  accounting" 
and  that  instead  of  a  surplus  there  was  in  reality  a  deficit 
of  $732,000. 

I  shall  not  take  your  time  to  enter  into  a  discussion  of 
the  relative  merits  of  the  two  assertions  which  involve  a 


33 


difference  of  $951,000.  It  is  sufficient  to  know  the  indis- 
putable fact  that  one  of  the  Postmasters-General  was 
wrong.  The  incident  serves  to  illustrate  not  only  the 
unreliability  of  statistics  but  the  probability  that  govern- 
ment statistics  are  manipulated  to  suit  the  purposes  of 
the  management  of  the  department. 

Just  as  it  was  to  the  interest  of  the  Postmaster-Gen- 
eral of  the  last  administration  to  make  a  bookkeeping 
showing  of  a  surplus  in  the  management  of  the  department 
of  which  he  was  the  head,  so  it  is  to  the  interest  of  the 
management  of  government-owned  railroads  of  every 
country  in  the  world  to  make  the  record  show  successful 
management.  Because  of  the  personal  interest  of  those 
in  control,  the  statistics  which  they  make  public  should  be 
viewed  with  care  and  accepted  as  true  only  after  the  most 
thorough  scrutiny. 

It  is  not  necessary  that  statistics  be  inaccurate  or  used 
with  dishonest  intent  in  order  to  be  misleading.  Correct 
figures  may  be  used  with  the  utmost  good  purpose  and  yet 
lead  to  erroneous  inferences. 

For  example — in  an  article  in  the  Saturday  Evening 
Post  of  June  6,  1914,  Governor  Stubbs  said : 

"During  the  year  1913  the  railroad  companies 
of  the  United  States  received  in  revenue  $3,171,- 
000,000.     There  are  in  this  country  approximately 
twenty  million  families  of  five  persons  each.     The 
average  cost  of  living  for  these  families  last  year 
was  approximately  $625  each.     Railroad  transpor- 
tation cost  each  of  these  families  an  average  of 
$158.50,  or  a  quarter  of  its  total  expense." 
Later,  Mr.  Stubbs  refers  to  this  railroad  revenue  as  a 
"tax."     While  Mr.  Stubbs  does  not  say  in  express  words 
what  conclusion  he  wishes  drawn  from  his  use  of  these 


34 


figures,  the  unexpressed  inference  is  that  each  family  was 
mulcted  to  the  extent  of  an  average  of  f  158.50  during  the 
year. 

In  a  reply  to  the  Stubbs  article,  President  Ripley,  of 
the  Santa  Fe,  presented  what  he  termed  a  "reductio  ad 
abstirdum,"  in  which  he  enumerated  nine  items  of  family 
expense  which  totaled  $12,848,000,000,  or  an  average  of 
$642.35  per  family.  These  items  did  not  include  food, 
clothing  or  rent,  yet  they  exceeded  the  total  average  cost 
of  living. 

The  thought  that  occurs  to  me  in  connection  with  the 
manner  of  presentation  which  Mr.  Stubbs  has  adopted  is 
this: 

If  a  computation  of  the  average  revenue  of  the  rail- 
roads per  family  is  pertinent  to  a  discussion  of  government 
ownership  of  railroads,  why  is  it  not  also  pertinent  to  com- 
pute the  average  railroad  expenditure  per  family?  If  the 
railroads  are  to  be  charged  with  the  revenue  collected, 
why  not  credit  them  with  the  money  expended? 

I  have  not  at  hand  the  documents  from  which  Gov. 
Stubbs  secured  his  statistics  as  to  the  total  revenue  of  the 
railroads  -of  the  United  States.  I  have  here,  however, 
the  text  of  the  1912  report  of  the  Interstate  Commerce 
Commission  covering  the  financial  operations  of  246,828 
miles  of  road  that  reported  to  that  body.  The  report  does 
not  state  the  amount  of  the  total  income  of  the  railroads, 
but  by  addition  I  ascertain  that  the  report  shows  for  this 
mileage  of  roads  a  total  income  from  all  sources  of  $2,995,- 
596,275,  or  an  average  of  almost  $150  per  family,  assuming 
that  there  are  twenty  million  families  in  the  United  States. 
These  same  roads  paid  out  for  wages,  supplies,  taxes,  inter- 
est and  dividends,  a  total  of  $2,942,682,321,  or  an  average 
of  over  $147  per  family.  The  remainder  of  the  income  was 
spent  for  additions,  betterments,  new  lines,  extensions  and 
reserves. 


35 

In  this  connection  the  following  table  on  ton  mile 
revenue  and  distribution  may  be  interesting  to  some : 

Average  receipts  per  ton  mile 0.744  cent 

Distributed  as  follows  : 

Wages   0.321  " 

Material  and  supplies 0.200  " 

Taxes 0.030  " 

Eentals  (net)  0.012  " 

Interest  (net)    0.108  " 

Balance  for  stockholders,  to  cover  adjustments,  improve- 
ments, dividends  and  surplus 0.073  " 

The  average  rate  of  dividend  on  all  railway  stock  in 
1912  was  4.64  per  cent. 

The  average  rate  of  interest  accrued  on  all  railway 
funded  debt  in  1912  was  4.22  per  cent.  This  represents 
interest  legally  accrued  and  charged  by  the  railways  to 
their  income  account,  whether  the  interest  was  actually 
paid  to  the  bondholders  or  not.  In  other  words,  this  covers 
interest  defaulted  as  well  as  interest  paid.  If  the  amount 
of  defaulted  interest  could  be  ascertained  and  subtracted 
from  the  total  amount  of  accrued  interest,  this  rate  would 
unquestionably  be  somewhat  smaller. 

Personally,  I  see  nothing  pertinent  in  the  computation 
of  the  average  railroad  revenue  per  family,  but,  if  there  is 
any  force  in  the  presentation  of  the  figures  as  to  income, 
I  submit  that  the  average  railroad  expenditure  per  family 
is  just  as  pertinent  and  the  averages  are  so  nearly  the  same 
as  practically  to  counterbalance. 

EXAMPLES  OF  DEPARTMENTAL  VACILLATION. 

In  1879  Congress  directed  the  Postmaster-General  to 
secure  from  the  railroad  companies  transporting  mail  cer- 
tain information  relative  to  operating  receipts  and  expendi- 
tures, the  purpose  being  ascertainment  for  proper  com- 
pensation for  railroad  mail  transportation.  Intermittent 
attention  was  paid  to  this  congressional  direction,  and  in 
1907  a  departmental  commission  of  five  was  appointed  by 
Postmaster-General  Cortelyou.  Over  140  questions  were 


36 

prepared  and  propounded  to  the  795  steam  railroads  then 
carrying  mail. 

It  cost  the  railroads  $250,000  to  furnish  the  informa- 
tion and  the  government  a  direct  out-of-pocket  cost  of 
$19,423  for  tabulation  of  the  information  contained  in  the 
railroads'  answers  which  is  set  forth  in  Document  No.  105, 
C2d  Congress,  first  session,  and  reported  to  Congress 
August  12,  1911.  Accompanying  said  document  was  a  sug- 
gested draft  of  a  bill  indorsed  by  Postmaster-General 
Hitchcock,  accompanied  by  a  letter  conveying  the  impres- 
sion that  the  result  of  the  adoption  of  such  legislation 
would  be  a  saving  to  the  government  of  about  f9,000,000 
in  railway  mail  pay. 

Here  we  have  a  concrete  result  of  four  years'  research 
work  in  a  department  with  an  expense  to  the  people  of 
practically  $270,000,  for,  in  the  final  analysis,  the  people 
pay  the  railroads  as  well  as  the  government's  bill. 

Study  of  the  bill  showed  that  Mr.  Hitchcock  and  his 
assistants  had  failed  to  realize  that  rights  of  way,  road 
beds,  track,  equipment  and  terminals  were  necessary  pre- 
requisites in  the  operation  of  mail  cars,  for  in  his  method 
of  payment  he  had  made  no  allowance  whatever  for  capital 
charges,  recommending  that  the  government  only  allow 
6  per  cent  on  the  ascertained  cost  to  the  railroad  companies 
for  carrying  the  mail,  and  his  predicted  $9,000,000  saving 
to  the  government  was  based  entirely  on  this  premise. 

Fortunately  Congress  had  created  a  Joint  Congres- 
sional Committee  which  made  an  exhaustive  study  of  the 
subject.  With  tardy  realization  of  the  absolute  fallacy 
and  injustice  of  his  first  suggested  plan,  Postmaster-Gen- 
eral Hitchcock,  on  January  23,  1913,  submitted  a  second 
draft  of  bill  for  regulation  of  railway  mail  pay.  Study 
of  this  plan  by  the  Joint  Congressional  Committee  soon 
demonstrated  that  the  plan  was  practically  unadministra- 
ble  and  certainly  undesirable. 

On  February  12,  1914,  a  third  plan,  in  the  nature  of  a 
tentative  draft,  was  submitted,  and  the  Joint  Congres- 


37 

sional  Committee  was  soon  satisfied  that  same  was  un- 
scientific and  most  undesirable,  giving  unnecessary  and 
dangerous  powers  to  the  Postmaster-General  and  contain- 
ing rates,  which,  if  adopted,  would  be  absolutely  con- 
fiscatory. 

The  Joint  Committee's  demonstration  and  the  ultimate 
realization  on  the  part  of  the  Department  of  its  mistake 
in  its  third  bill  resulted  in  the  submission  to  the  House 
of  Representatives  of  a  draft  of  what  is  known  as  H.  R. 
17042,  introduced  in  the  House  of  Representatives  on  June 
4,  1914,  sections  13,  14  and  15  of  which  cover  "Compen- 
sation for  the  Transportation  of  Mail."  The  Joint  Con- 
gressional Committee  again  demonstrated  the  department's 
suggested  rates  under  its  new  plan  to  be  absolutely  con- 
fiscatory. 

Here  we  had  four  departmental  plans  suggested  and 
urged  for  enactment  within  a  period  of  three  years,  each 
differing  from  the  others  in  fundamental  features,  but  all 
seeking  further  dictatorial  and  plenary  powers  for  the 
Postmaster-General.  Do  you  expect  successful  government 
ownership  of  railroads  under  such  a  vacillating  manage- 
ment as  that? 

During  the  nearly  two  years'  study  made  by  the  Con- 
gressional Joint  Committee  the  department  presented  esti- 
mates of  annual  over-payments  to  the  railroads  to  the 
amounts  of  {9,000,000,  {10,531,792,  {1,615,532,  {319,832 
and  {221,832.  Many  other  instances  of. very  inadequate 
and  unreliable  statistics  furnished  by  the  Post-Office  De- 
partment during  this  investigation  could  be  cited. 

POSTAL  STATISTICS  ERRONEOUS. 
Very  similar  was  the  experience  of  a  Congressional 
Committee  between  1898  and  1901,  when  the  department 
submitted  statistics  that  the  railroads  were  paid  on  an 
average  of  6.58  cents  per  pound  for  transporting  mail 
averaging  40  cents  per  ton  mile,  with  an  average  haul 
of  328  miles,  whereas  a  special  weighing  demonstrated 


that  the  average  payment  was,  in  fact,  2.75  cents  per 

pound,  averaging  only  12.56  cents  per  ton  mile,  with  an 

average  haul  of  438  miles. 

Commenting     upon     these     statistics,     Congressman 

Moody,  afterwards  a  Justice  of  the  Supreme  Court,  said: 

"In  other  words,  we  were  not  paying  one-third 
as  much  as  the  Post-Office  Department  had  led  the 
people  of  the  country  to  believe  we  had  been  pay- 
ing." 

The  commission  appointed  in  1911  to  investigate  the 
subject  of  Postage  on  Second  Class  Mail  Matter,  of  which 
commission  Justice  Hughes  of  the  Supreme  Court  was 
chairman,  had  a  similar  experience.  It  repeatedly  found 
the  statistics  submitted  by  the  Post-Office  Department  to 
be  erroneous  and  the  department  changed  its  figures  where 
compelled  to  do  so  by  demonstration  of  their  inaccuracy. 
So  glaring  and  numerous  were  the  errors  that  the  com- 
mission commented  upon  them  as  follows: 

"It  seems  hardly  worth  while  to  include  sub- 
sidiary tables  from  which  these  results  are  taken  or 
to  criticize  the  details,  as  the  commission  has  little 
confidence  in  their  accuracy." 

I  have  made  frequent  references  to  the  Post-Office  De- 
partment not  through  any  desire  to  specially  criticize  that 
department,  but  because  the  postal  service  is  the  only 
government  activity  which  corresponds  with  the  govern- 
ment ownership  and  operation  of  railroads  and  furnishes 
the  only  demonstration  based  upon  experience  of  what  we 
might  expect  under  government  ownership  of  railroads 
and  other  national  public  utilities. 

REMEDY  FOR  EXISTING  EVILS. 

I  recognize  the  fact  that  evils  exist  in  everv  line  of 
human  activity,  and  that  remedies  must  be  provided.  My 
own  theory  is  that  government  should  leave  as  large  oppor- 
tunity as  possible  for  individual  enterprise  and  industry, 


39 

holding  out  as  an  incentive  the  assurance  of  enjoyment  of 
the  rewards  of  legitimate  endeavor.  In  order  that  oppor- 
tunities may  be  equally  open  to  all,  wrongful  acts  must 
be  prohibited  by  criminal  statutes  which  should  impose 
penalties  so  severe  and  make  punishment  so  certain  that 
violation  will  be  extremely  rare.  This  assurance  of  a  large 
degree  of  liberty  and  also  definite  restrictions  upon  im- 
proper action  should  not  depend  upon  the  varying  whims 
or  prejudices  or  even  the  sound  judgment  of  bureau  heads, 
but  should  be  prescribed  by  act  of  the  law-making  body 
established  by  the  constitution,  so  that  every  citizen  can 
read  in  the  plain  language  of  the  statute  the  extent  of  his 
rights  and  the  limitation  upon  his  liberty. 

No  one  will  condemn  more  severely  than  I  the  wrongful 
acts  of  corporation  managers  who  have  pillaged  their 
stockholders  or  wrecked  the  institutions  over  which  they 
had  control.  Deeds  of  such  character  should  be  made 
criminal  by  law,  if  not  already  so  defined,  and  prison 
doors  should  swing  open  to  receive  and  confine  the  culprit 
who  is  unfaithful  to  his  trust. 

But  eradication  of  evils  of  this  kind  does  not  require 
government  ownership.  There  is  no  need  to  stifle  indi- 
vidual enterprise,  ambition  and  energy  in  order  to  pre- 
vent repetition  of  wrongful  acts.  Advocates  of  govern- 
ment ownership  propose  a  remedy  worse  than  the  disease. 
In  the  misguided  effort  to  cure  evils  in  railroad  finance, 
they  would  fasten  upon  the  nation  evils  far  more  serious, 
far  more  insidious,,  more  deeply  affecting  the  welfare  of 
present  and  future  generations,  striking  at  the  very  vitals 
of  truly  representative  government. 

For  my  part,  I  have  not  lost  confidence  in  government 
by  law.  I  am  not  convinced  that  the  crooks  in  railroad- 
ing so  far  outnumber  the  honest  men  that  elimination  of 
the  dishonest  is  hopeless.  The  day  is  not  near  so  dark  nor 
the  prospects  so  gloomy  as  some  would  have  us  believe. 
There  is  still  a  preponderance  of  good  among  the  Ameri- 
can people  and  we  have  not  yet  reached  the  time  when  we 


40 

must  write  upon  the  pages  of  our  history  the  declaration 
that  we  shall  buy  the  railroads  because  we  cannot  control 
the  crooks. 

I  am  not  satisfied  that  efficiency  goes  with  government 
employment,  I  am  not  ready  to  give  my  approval  to  a 
plan  which  means  the  establishment  of  a  political  machine 
composed  of  three  million  government  employees  and  their 
relatives  and  friends.  I  have  the  utmost  confidence  that  if 
Congress  will  take  its  magnifying  glass  off  the  White 
House  and  relieve  itself  of  the  delusion  that  a  citizen  be- 
comes an  omnipotent  statesman  as  soon  as  he  has  become 
president,  we  shall  be  able  to  solve  a  considerable  number 
of  the  problems  that  now  confront  us,  and  without  placing 
a  check  upon  that  marvelous  American  enterprise  which  is 
justly  the  admiration  of  the  civilized  world.  I  believe  that 
the  American  people  still  have  confidence  in  representative 
government  and  that  when  they  realize  the  trend  of  public 
affairs  they  will  rebuke  the  effort  to  establish  one-man  gov- 
ernment with  dictatorship  from  the  executive  mansion. 


41 


FAILURE  OF  GOVERNMENT  TELE- 
GRAPH  AND  TELEPHONE  SYSTEMS. 

F.  G.  R.  GORDON. 

The  most  common  argument  made  in  favor  of  the  social- 
ization of  the  telegraph  and  telephone  is  that  under  private 
ownership  they  are  a  monopoly,  operated  for  profit,  with 
high  rates  and  poor  service ;  and  that  by  having  the  govern- 
ment own  and  operate  them  they  can  become  a  part  of  the 
postal  system  with  large  economies  in  operation,  and  in 
turn  supply  the  people  with  cheaper  rates,  good  service 
and  higher  wages  to  the  men  and  women  who  operate  the 
lines,  and,  lastly,  provide  a  surplus  for  the  Government. 

I  shall  prove  just  the  opposite  of  all  this  glittering 
dream;  I  shall  prove  that  wherever  the  telegraph  or  the 
telephone  has  been  socialized  there  is  extremely  poor  ser- 
vice, with  large  financial  losses,  low  wages  for  employees, 
and  rates  that,  on  the  whole,  are  fully  as  high  as  they  are 
in  this  country,  and  in  many  instances  higher. 

Nearly  all  the  nations  of  Europe,  as  well  as  New  Zea- 
land and  Australia,  own  and  operate  both  telegraph  and 
telephone  systems  and  have  done  so  for  many  years. 

The  alleged  "success"  of  our  Post-Office  Department  is 
used  as  an  argument  for  the  further  extension  of  the  social- 
ization of  the  means  of  communication.  But,  as  a  matter 
of  fact,  there  are  fundamental  differences  existing  between 
the  social  function  of  the  Post-Office  and  the  work  of  the 
telegraphs  and  telephones.  The  mail  service  is  universal; 
it  requires  mostly  only  the  simplest  character  in  its  oper- 
ation; its  work  is  to  a  great  extent  performed  by  private 
common  carriers.  But,  despite  its  comparative  simplicity 
and  ease  of  operation,  our  Post-Office  has  not  been  a  finan- 
cial success  from  any  standpoint.  All  the  gains,  where 
any  have  been  made,  have  come  from  the  private  ownership 
features  of  that  business. 


42 

The  Hon.  David  J.  Lewis,  author  of  the  bill  to  national- 
ize the  telephone  system,  asserts  that  1.85  per  cent  of  the 
business  of  the  Post-Office  is  franked  and  that  but  for 
this  free  transportation,  and  the  further  fact  that  29.24 
per  cent  of  the  business  pays  only  5.19  per  cent  of  the 
revenue,  our  Post-Office  Department  would  have  paid  an 
annual  profit  each  year  since  the  Civil  War.  This  is  merely 
a  half-truth  and  an  assumption,  and  in  this  case  the  half- 
truth  is  pretty  bad.  In  the  first  place,  if  that  1.85  per  cent 
of  franked  mail  were  not  free,  three- fourths  of  it  would  not 
be  sent  through  the  mails  at  all,  so  Mr.  Lewis  is  75  per 
cent  wrong  there.  And  the  same  thing  is  true  of  at  least 
half  of  the  29.24  per  cent  which  he  says  pays  5.19  per  cent 
of  the  revenue.  Congressman  Lewis  is  either  not  very 
familiar  with  these  facts,  which  are  self-evident,  or  he  is 
merely  a  dreamer  of  strange  dreams.  And  as  for  the  frank- 
ing privilege,  he  ought  to  know  that  the  Post-Office  De- 
partment is  the  recipient  of  large  favors  from  Uncle  Sam, 
which  rightly  are  a  part  of  the  expense  of  conducting  the 
business  but  which  are  paid  for  by  the  Treasury  Depart- 
ment. 

The  most  striking  example  of  this  last  statement  is  that 
the  Postal  Department  does  not  build  or  care  for  the  public 
buildings  which  it  occupies.  While  the  Post-Office  does  an 
annual  business,  on  both  sides,  of  about  $600,000,000  it 
has  only  five  or  six  million  dollars  of  capitalization  for  the 
entire  Nation.  Even  some  of  the  salaries  of  the  staff  are 
paid  out  of  the  other  departments ;  the  Postmaster-General, 
Assistant  Postmaster-General,  the  Assistant  Attorney- 
General  and  the  subsidiary  general  officials  connected  with 
these  officials  are  not  paid  from  the  postal  revenues.  The 
expenses  of  this  character,  as  shown  by  an  examination  of 
the  Appropriations  Act  of  March  4, 1913,  were  to  amount  in 
1914  to  $1,913,350.  In  the  appropriations  for  the  Treas- 
ury Department  we  also  find  that  for  the  office  of  Auditor 
for  the  Post-Office  there  was  appropriated  for  salaries  in  the 


43 

postal  savings  system  and  other  expenses  the  sum  of  f  766,- 
620,  with  an  additional  sum  of  |18,000  for  the  postal 
savings  banks,  and  f 5,000  for  the  Department  of  Justice 
for  the  Attorney  General  for  the  Post-Office.  This  figures 
up  a  total  of  |2,702,970  of  expenses  that  legitimately  be- 
long to  the  Post-Office  Department,  but  which  are  met  by 
other  departments.  It  is  quite  pertinent  to  ask  Congress- 
man David  J.  Lewis,  public  ownership  advocate,  why  he 
failed  to  give  us  this  information. 

Vastly  more  important  fhan  these  expenditures  are 
those  for  public  buildings  and  their  repairs  and  care.  In 
the  twelve  months  from  July  1,  1911,  to  June  30,  1912,  the 
total  cost  for  public  buildings  and  their  care  amounted  to 
the  great  sum  of  |22,660,212.85,  and  at  least  75  per  cent 
of  this  outlay  legitimately  belonged  to  the  Post-Office,  and 
was  paid  by  the  Treasury  Department.  Keeping  in  mind 
the  statement  of  Congressman  Lewis  that  but  for  the  frank- 
ing system,  etc.,  the  Post-Office  would  have  paid  every  year 
since  the  Civil  War,  I  point  to  the  fact  that  the  entire 
revenue  of  the  postal  system  from  1865  to  1913  was  $3,775,- 
838,529,  and  the  total  gross  expenditure  was  $4,055,106,045. 
This  shows  a  direct  loss  of  $279,267,516  in  these  48  years. 
The  indirect  losses  were  millions  more.  For  instance :  The 
public  buildings  used  exclusively  for  the  Post-Office  had 
cost  for  construction,  sites,  and  extensions  and  alterations 
the  sum  of  $58,991,738.42  up  to  June  30,  1912.  And  other 
buildings  which  were  jointly  used  by  the  Post-Office,  Cus- 
tom House,  etc.,  had  cost  $127,080,549.68.  If  we  allow  but 
75  per  cent  of  this  last  cost  to  the  postal  service,  then  we 
have  a  total  up  to  June  30,  1912,  of  more  than  $153,000,000 
as  a  capital  investment  which  properly  belonged  to  the 
Post-Office  to  pay  interest  upon,  though  it  paid  not  a  cent. 
The  annual  interest  charge  at  4  per  cent  would  amount  to 
$6,000,000.  When  Congressman  Lewis  was  using  the  Post- 
Office  to  bolster  up  his  argument  for  a  socialized  telephone 
he  didn't  give  us  this  very  valuable  information.  Take 
this  interest  charge  and  the  cost  for  salaries  paid  by  other 


44 

departments  which  should  be  paid  by  the  Post-Office, 
amounting  to  nearly  $3,000,000,  and  the  care  for  the  public 
buildings,  their  extension  and  repairs,  we  have  a  total 
annual  deficit  of  more  than  $14,000,000  on  the  average  for 
every  year  since  1865!!!  Here  is  a  grand  total  loss  of 
$672,000,000  in  48  years,  and  this  is  what  public  ownership 
advocates  call  a  "success." 

Just  now  these  advocates  are  boasting  of  the  wonderful 
success  of  the  parcel  post.  The  alleged  facts  about  that 
much-praised  system  are  simply  more  half-truths.  The 
mails  are  weighed  once  in  four  years  and  the  railroads  are 
paid  on  this  basis  for  the  succeeding  four  years.  Nearly 
every  railroad  official  in  the  country  is  complaining  of  in- 
adequate pay  for  this  service.  Some  statistics  will  tell  why 
the  postal  revenues  for  1907  were  $183,585,000,  and  for 
1912  they  were  $246,744,000,  or  an  increase  of  $63,159,000. 
The  railway  mail  pay  in  1907  was  $51,008,000,  and  in  1912 
it  was  $50,703,000.  In  other  words  while  the  mails  were 
increasing  several  hundred  million  pounds  the  railway  mail 
pay  was  decreasing.  This  was  before  the  parcel  post  was 
established  January  1,  1913.  The  service  was  inaugurated 
with  a  weight  limit  of  eleven  pounds,  and  for  the  first  six 
months  the  railroads  received  no  compensation  whatever 
for  this  greatly  increased  business.  On  July  1,  1913,  all 
the  railroads  which  did  not  have  a  weighing  in  the  Spring 
of  1913  were  allowed  an  increase  of  five  per  cent  for  mail 
transportation.  A  month  later  the  Postmaster-General 
increased  the  weight  limit  to  20  pounds  and  on  January 
1,  1914,  a  further  increase  was  made.  This  naturally  pro- 
duced a  large  increase  in  the  volume  of  traffic,  which  the 
railroads  were  forced  to  carry  absolutely  free.  It  was 
estimated  that  the  parcel  post  would  carry  600,000,000 
packages  for  this  year  (1914)  and  that  it  would  yield  a 
revenue  to  the  Post-Office  Department  of  $60,000,000.  This 
is  how  Uncle  Sam  makes  money  on  the  parcel  post. 

If  a  shoe  manufacturer  had  free  rent  and  heat  for  his 
plant  and  paid  only  75  per  cent  for  the  cost  of  transporta- 


45 

tion  for  100  per  cent  of  service,  is  there  any  reasen  why  he 
should  not  make  a  howling  success  while  his  competitor! 
all  about  him  were  failing?  As  a  matter  of  fact  the  Post- 
Office  Department  is  underpaying  the  railroads  to-day  to 
the  extent  of  from  $20,000,000  to  $30,000,000  annually,  and 
at  the  same  time  is  losing  about  $14,000,000  every  year 
on  the  average  if  we  take  all  the  facts  into  consideration. 
It's  about  time  that  the  enthusiasm  directed  upon  blindly 
lauding  the  Post-Office  Department  be  concentrated  upon 
a  constructive  effort  to  overhaul  the  system  and  remedy 
its  glaring  defects.  It  is  the  worst  managed  big  business  in 
this  country,  and  talk  of  its  success  simply  encourages  the 
growth  of  the  socialistic  idea  in  other  lines,  and  more 
especially  as  to  railroads,  telegraphs  and  telephones. 
Uncle  Sam  pays  the  railroads  less  than  twenty  per  cent  of 
the  total  expense  of  the  postal  service,  while  the  British 
Post-Office  pays  24  per  cent  in  general,  and  55  per  cent  on 
the  parcel  post  business. 

Fortunately  for  us,  other  nations  have  socialized  both 
telegraph  and  telephone  systems,  and  therefore  compari- 
sons between  private  and  public  ownership  can  be  shown. 
In  both  Europe  and  Australia  the  publicly  owned  telegraph 
and  telephone  has  passed  far  beyond  the  experimental 
stage.  I  propose  to  show  by  facts  and  statistics  that  gov- 
ernment ownership  of  these  means  of  communication  has 
resulted  in  failure.  In  the  first  place  let  me  point  out  the 
foolishness  of  attempting  to  socialize  the  telephone  and 
leaving  the  telegraph  under  private  control.  Governments 
of  Europe  which  had  public  ownership  of  the  telegraph 
socialized  the  telephone  just  as  soon  as  it  was  demonstrated 
that  it  could  carry  conversation,  for  the  very  reason  that 
they  did  not  dare  to  face  competition,  and  likewise  if  we 
are  to  socialize  the  telephone  we  must  also  own  and  operate 
the  telegraph  or  else  suffer  a  competition  that  Uncle  Sam 
can  not  successfully  meet.  It  is  assumed  by  the  advocates 
of  public  ownership  that  the  telegraph  and  telephone  can 
be  consolidated  with  the  Post-Office  and  thus  save  large 
expense  in  operation.  It  is,  however,  the  general  outcome 


46 

in  the  administrations  of  the  several  nations  of  Europe  that 
this  does  not  work  out  in  practice  and  that  the  supposed 
economies  do  not  materialize. 

TELEGRAPH  RATES  COMPARED. 

A  great  deal  of  loose  talk  and  misstatement  has  been 
made  regarding  rates  on  the  publicly  owned  telegraph 
systems  of  the  world.  A  very  important  fact  in  connection 
with  this  is  that  in  Europe  the  address  and  signature  are 
both  counted  as  a  part  of  the  message.  Take  the  telegraph 
system  of  Great  Britain  as  an  example.  It  looks  like  a 
very  cheap  service  when  we  hear  that  a  twelve-word  mes- 
sage is  sent  over  the  wires  of  Great  Britain  for  12  cents. 
But  if  you  send  a  message  from  London  to  Liverpool,  you 
will  naturally  give  the  city  and  street  address  and  the 
names  of  sender  and  receiver.  This  will  consume  at  least 
ten  words,  leaving  only  two  for  the  text,  or  in  reality  six 
cents  a  word,  as  compared  with  the  method  in  this  country, 
where  the  address  and  signature  are  not  counted.  The 
following  table  shows  the  different  rates  in  Europe  for  a 
ten- word  message  with  address  and  signature,  allowing  ten 
words  for  address,  etc. : 

France   $0.193          Great  Britain   $0.200 

Norway    268          Germany    238 

Belgium 116          Italy  .  .* 212 

Sweden 268          Denmark 268 

New  Zealand 200          Austria 244 

United  States..  .250  to     .300 

The  corresponding  rates  for  ten-word  messages,  allow- 
ing five  words  for  address  and  signature,  are  as  follows : 

France   $0.102  Great  Britain   $0.15 

Norway    201  Germany    179 

Belgium 096  Italy 164 

Sweden 201  Denmark    201 

New  Zealand 15  Austria 183 

For  the  preferred  rates  we  find  that  several  countries 
in  Europe  actually  charge  from  two  to  three  times  higher 
than  we  pay  in  this  country,  allowing  ten  words  for  address 


47 

and  signature.  In  Germany,  for  example,  the  rate  is  71.4 
cents;  in  New  Zealand  it  is  40  cents;  in  Italy  63.7  cents; 
in  Austria  it  is  73  cents.  In  Great  Britain  there  is  no 
urgent  rate.  Urgent  or  preferred  rates  in  the  United 
States  are  on  the  above  basis — 25  to  30  cents.  Allowing 
only  five  words  for  address  and  signature,  the  preferred 
rates  for  ten  words  of  text  would  be:  Germany,  53.6 
cents;  New  Zealand,  30  cents;  Italy,  49.2  cents,  and 
Austria,  54.9  cents. 

With  the  exception  of  Russia  all  the  countries  ojf 
Europe  are  small  compared  with  the  great  territory  of 
this  country  and  Canada.  The  trade  and  commerce  of 
Europe  may  be  compared  in  practice  with  that  of  the 
different  States  or  Provinces  of  this  hemisphere.  Thus 
the  international  messages  all  over  Europe  are  numerous, 
as  is  natural  among  more  than  300,000,000  people  living 
mostly  within  two  thousand  miles  of  one  another.  Twenty- 
seven  per  cent  of  the  telegraph  messages  in  France  are 
domestic  non-commercial  and  international  inward  and 
transit  telegrams;  50  per  cent  in  Norway;  44  in  Sweden; 
51  in  Switzerland;  24  in  Germany;  25  in  Italy;  40  in 
Austria,  and  10  in  Great  Britain. 

I  have  attached  to  this  paper  as  an  Appendix  a  table 
showing  the  percentage  to  total  telegrams  (a)  of  inter- 
national telegrams  of  all  kinds;  (b)  of  outward  interna- 
tional telegrams;  and  (c)  of  domestic  non-commercial  tele- 
grams. These  figures  are  taken  from  those  published  by 
the  Office  of  the  International  Telegraph  Union  at  Berne 
(the  source  from  which  Congressman  Lewis's  statistics 
are  derived),  without  any  attempt  to  check  their  accuracy. 
An  ordinary  message  of  15  words,  which  includes  the  ad- 
dress and  signature,  sent  from  Belgium  to  France  costs 
35.7  cents,  but  if  the  same  message  be  preferred  or  urgent 
the  cost  is  $1.071.  The  rates  from  Belgium  to  Germany 
are  the  same.  A  like  message  from  France  to  Germany 
(ordinary)  will  cost  ordinarily  43.4  cents;  urgent,  $1.303. 
A  15-word  message  from  Great  Britain  to  France  costs 


48 


60.6  cents;  from  Sweden  to  France,  ordinary,  72.4  cents; 
urgent,  $2.171.  From  Switzerland  to  France,  or  to  Ger- 
many, the  rate  is  ordinary  38.6  cents,  and  urgent,  $1.158. 
For  the  distance  from  Stockholm  to  Paris,  1,000  miles,  the 
rate  for  a  15-word  message,  address  and  signature  is  72.4 
cents.  From  New  York  to  Chicago,  about  the  same  dis- 
tance, the  rate  for  a  10-word  message,  address  and  signa- 
ture free,  is  50  cents.  And  this  72.4  cent  rate  is  not  far 
from  the  average  all  over  Europe.  For  "urgent"  every- 
where in  Europe  the  rates  are  much  higher  than  in  this 
country.  Thus  we  see  that  in  Europe  on  the  whole  the 
international  rates  are  double  the  domestic,  and  it  is  the 
international  rates  that  should  be  compared  with  rates 
in  this  country  because  the  distances  are  more  nearly  even. 

We  should  not  lose  sight  of  the  fact  that  what  is  known 
as  "ordinary"  service  on  the  socialistic  telegraph  lines 
throughout  Europe  is  a  service  that  is  so  poor,  so  utterly 
incompetent,  that  it  would  not  be  tolerated  in  this  country. 
The  "preferred"  service  is  the  only  kind  that  corresponds 
with  the  average  service  on  the  telegraph  lines  of  this 
country,  and  the  cost  in  Europe  is  very  much  higher  than 
for  the  same  service  in  the  United  States. 

Congressman  Lewis  and  other  advocates  of  government 
ownership  of  telegraph  lines  submit  tables  of  rates  in 
Europe  which  to  a  considerable  extent  are  misleading, 
owing  to  the  fact  that  on  messages  passing  through  two 
countries  a  single  message  is  counted  as  two  and  the  cost 
split;  if  it  passes  through  three  countries,  it  is  made  to 
count  for  three  messages,  with  a  one-third  rate.  There 
is  no  more  justification  for  this  "splitting  up"  of  a  mes- 
sage than  there  would  be  for  our  counting  a  message  from 
Smith  of  Massachusetts  to  Jones  of  Pennsylvania,  as  three 
messages  and  dividing  the  cost,  making  it  one-third  per 
message  the  real  rate  because  it  happened  to  pass  through 
three  states. 

From  Paris  to  Vienna  is  about  650  miles,  and  the  cost 
for  a  15-word  message  is  57.9  cents  as  against  only  40  cents 


49 


in  this  country  for  the  same  distance.  But  Mr.  Lewis 
would  divide  the  message  between  Paris  and  Vienna  into 
three  and  split  up  the  cost,  and  thus  demonstrate  that 
rates  are  higher  here  than  in  Europe. 

The  following  table  shows  the  great  difference  in  the 
area  of  this  country  and  the  different  countries  in  Europe : 

Area  in  Per  cent 

Square  Miles  of  U.  S. 

United  States  *3,026,789  100.0 

Austria 115,800  3.8 

Belgium  11,400  .4 

Denmark   14,800  .5 

France   207,000  6.8 

German  Empire   208,800  6.9 

Great  Britain 121,400  4.0 

Hungary    125,600  4.1 

Italy 110,700  3.7 

Netherlands 12,600  .4 

Norway    124,100  4.1 

Sweden 172,900  5.7 

Switzerland   16,000  .5 

This  table  gives  you  at  a  glance  the  tremendous  dif- 
ferences in  distance  within  the  boundary  lines  of  these 
countries.  The  average  telegraph  haul  in  the  United 
States  is  about  570  miles,  and  the  average  for  the  night 
letters  is  1,025  miles.  In  Belgium  the  average  haul  for 
domestic  telegrams  is  only  42.5  miles,  in  Great  Britain 
150  miles.  Thus,  measured  by  the  distance  served,  the 
average  cost  for  telegraph  messages  in  this  country  is  far 
cheaper  than  in  Europe.  As  for  service,  every  one  who  has 
lived  in  Europe,  or  who  has  taken  the  trouble  to  investi- 
gate, knows  that  the  telegraph  service  of  this  country  is 
far  superior  to  that  of  any  other  country. 

WAGES. 

Another  point  which  public  ownership  advocates  seem 
to  know  nothing  about,  or  they  ignore  it,  is  the  difference 
in  wages  in  the  several  countries  compared.  Facts  show, 


*  This  area  excludes  Alaska,  the  Canal  Zone  and  the  Island  Possessions. 


50 

however,  that  the  wages  paid  to  telegraphers  in  this  coun- 
try will  average  about  two  and  one-half  times  those  of 
Europe. 

DEFICITS. 

Deficits  is  another  thing  that  the  public  ownership 
fellow  seems  to  forget  about.  Nearly  every  government 
owned  telegraph  system  in  the  world  is  run  at  a  loss.  In 
1870  the  British  nation  completed  the  ownership  of  the 
entire  telegraph  systems.  It  is  reported  that  the  profit 
under  private  ownership  was  an  average  of  $1,600,000  an- 
nually. The  government  had  only  fairly  got  started  when 
the  deficits  commenced  and  they  have  ever  since  been  grow- 
ing. For  the  last  few  years  the  annual  loss  on  the  system 
has  been  over  $5,000,000.  For  the  twelve  months  ending 
March  31,  1913,  it  was  £1,175,347  or  $5,723,940.  The  year 
before,  according  to  a  statement  made  by  a  socialist  leader 
to  the  official  organ  of  the  Socialist  Party  of  this  country, 
it  was  $6,196,285.  These  losses  include  the  interest 
charges  upon  £10,867,644  or  $52,925,426  of  capital.  It 
has  been  stated  by  several  writers,  who  assert  that  they 
have  the  facts,  that  this  $52,925,426  does  not,  however, 
represent  the  full  cost  of  the  system,  and  that  some  $30,- 
000,000  additional  capital  should  by  right  be  included  in 
the  capital  cost,  Sydney  Brooks  places  the  loss  since 
1870  of  the  socialized  system  at  $200,000,000.  We  are 
told  by  the  socialists  that  this  loss  is  more  than  offset  by 
the  cheaper  rates.  This  is  not  true,  but  if  it  were,  where 
would  it  leave  us?  The  system  would  be  in  the  position 
of  taxing  all  the  people  in  43  years  some  $200,000,000  in 
order  that  the  dukes,  the  lords,  the  rich  bankers,  merchants 
and  manufacturers  might  have  their  telegraph  rates  cut 
in  two.  In  other  words  it  would  be  taxing  all  the  people 
in  order  that  less  than  10  per  cent  of  them  might  have 
"cheap"  rates!  Ten  per  cent  of  the  population  send  90 
to  95  per  cent  of  the  messages.  And,  as  already  explained, 
the  rates  are  not  so  cheap  as  they  appear  in  the  reports. 
The  cost  of  twelve  cents  for  twelve  words  sounds  pretty 


51 


good  until  one  understands  that  the  address  and  signature 
are  charged  for.  John  L.  Jones,  3  Lane  Street,  Liverpool, 
counts  seven  words  and  A.  T.  Smith  three  more,  making 
ten  out  of  the  twelve  used  for  address  and  signature,  which 
shows  about  how  much  of  a  message  one  can  send  for 
12  cents.  Each  additional  word  is  charged  one  cent,  so 
that  12  words  with  the  foregoing  address  and  signature 
would  cost  22  cents,  and  not  12,  as  we  are  told  by  those 
who  want  our  aid  in  giving  the  people  of  this  country  more 
socialism.  In  1901,  which  is  the  latest  available  figure  in 
regard  to  telegraph  losses  in  that  country,  the  government 
telegraph  system  of  Germany  lost  f  3,500,000,  while  that  of 
France  lost  $1,880,000  in  1905,  the  latest  figure  available. 
In  1912-13  the  loss  in  Australia  was  $799,206  and  in  New 
Zealand  on  telegraph  and  telephone  combined  the  loss  was 
$313,212.  Nor  must  we  lose  sight  of  the  fact  that  the 
publicly-owned  telegraph  and  telephone  pay  no  taxes. 
The  taxes  which  they  would  pay  were  they  in  private  hands 
would  have  to  be  paid  by  the  people  under  other  forms. 

No  thoughtful  man  can  imagine  that  the  great  tele- 
graph system  of  this  nation  can  be  operated  anywhere 
near  as  cheaply  under  government  ownership  as  under  the 
present  system.  Public  ownership  everywhere  has  in- 
creased the  cost  of  operation  and  almost  always  lowered 
the  standard  of  efficiency.  If  we  were  to  socialize  the 
telegraph  system  to-morrow,  in  less  than  two  years  we 
would  add  25  to  35  per  cent  to  the  cost  of  operation;  we 
would  overstaff  the  system,  hedge  it  about  with  red  tape, 
and  in  time  make  of  it  what  our  postal  system  is,  namely 
the  worst  managed  big  business  in  the  nation. 

TELEPHONES. 

As  with  the  telegraph  so  with  the  telephone.  We  are 
presented  half  truths  and  whole  misrepresentations  of  the 
government  owned  telephones  of  the  world  by  Socialists 
and  public  ownership  advocates. 


52 

For  txample,  we  all  know  that  in  this  country  we  enjoy 
a  telephone  service  that  is  continuous,  24  hours  a  day  and 
365  days  in  a  year.  In  Europe  and  Australia  there  is  a 
limited  service.  Only  a  small  percentage  of  the  stations 
are  open  24  hours  a  day,  many  are  closed  Sundays  and 
holidays.  In  Switzerland  only  three  and  a  half  per  cent 
of  the  total  telephone  offices  give  a  24-hour  service,  while 
46  per  cent  are  open  from  7  A.  M.  to  noon,  then  closed 
for  two  hours,  open  from  2  to  6  P.  M.,  and  from  8  P.  M. 
to  8 :30  P.  M.,  and  closed  the  rest  of  the  day.  Forty-two 
per  cent  are  open  from  6  A.  M.  to  9  P.  M.  only.  In  New 
Zealand  only  6.3  per  cent  give  a  continuous  service;  34.1 
per  cent  are  not  open  after  midnight,  and  59.6  per  cent 
are  open  from  9  A.  M.  to  5  P.  M.  only;  while  84.7 
per  cent  are  not  open  on  Sundays  at  all,  and  80  per  cent 
are  not  open  on  holidays.  In  Germany  an  extra  charge  is 
made  for  service  at  night  in  the  limited  number  of  ex- 
changes which  give  night  service.  Thirty  per  cent  of  the 
German  exchanges  are  closed  during  the  noon  hour.  Many 
exchanges  in  Great  Britain  are  closed  from  10  P.  M.  to 
4  A.  M.  Most  of  the  small  exchanges  in  France  are  closed 
during  the  noon  hour  and  after  10  P.  M.,  and  on  Sundays 
are  open  only  to  10  A.  M.  In  Limoges,  a  city  of  92,000 
population  and  the  seat  of  the  great  pottery  industry  of 
France,  an  all-night  service  is  given,  but  is  paid  for  by  the 
Chamber  of  Commerce.  Imagine  the  Springfield,  Mass., 
Board  of  Trade  paying  for  night  service  for  the  population 
of  that  city.  In  Nimes,  a  city  of  80,000,  there  is  no  night 
service  after  midnight.  Recent  statistics  covering  the 
whole  of  Belgium  show  that  out  of  the  272  central  offices 
in  the  country,  only  12  are  operated  day  and  night;  190 
are  open  only  from  7  A.  M.  to  9  P.  M.,  while  in  60  the  hours 
of  service  are  even  more  limited. 

It  is  of   importance  that   the  telephone  systems  of 


53 


Europe  cost  more  than  in  this  country  frera  an  inye»twi«iit 
standpoint,  as  the  following  shows: 

Average  Investment 
Per  Telephone 

Austria   $211 

Belgium    276 

France 257 

German  Empire 178* 

Hungary 192 

Switzerland 190 

Australia 163 

United  States  (Bell) 153 

Yet  the  labor  per  day  or  hour  in  this  country  for  the 
building  of  a  telephone  plant  is  more  than  twice  as  high 
as  in  Europe. 

COMPARISON  OF  RATES. 

There  are  several  grades  of  rates  in  this  country  for 
the  same  cities ;  but  in  Europe  this  is  not  the  system.  In 
Paris,  for  instance,  there  is  only  one  rate  for  business  and 
residence,  the  cost  being  $77.20  a  year.  In  New  York, 
with  graded  rates,  79  per  cent  of  the  telephones  cost  less 
than  the  uniform  Paris  rate,  many  of  them  being  as  low 
as  $36  to  $42  per  subscriber.  Paris  has  95,000  telephones ; 
New  York,  483,653,  and  Philadelphia  over  133,000,  and  90 
per  cent  of  these  are  under  the  Paris  price.  Chicago  has 
more  than  300,000  in  use  and  91  per  cent  cost  less  than 
the  Paris  rate ;  Budapest  has  24,567  telephones,  which  cost 
just  $60  a  year  each ;  St.  Paul,  Minn.,  has  23,000,  which 
cost  a  maximum  of  $72  and  a  minimum  rate  of  $24,  and 
94  per  cent  of  the  telephones  in  use  in  St.  Paul  cost  less 
than  the  $60  rate  of  Budapest.  In  connection  with  these 
rates,  which  are  in  many  respects  higher  than  those  of  the 
United  States,  we  must  not  forget  to  speak  of  the  wages, 
which  are  most  important,  for  they  are  a  large  part  of  the 
cost  of  operating  a  telephone  plant.  The  following  tables 

*A  German  official  has  recently  told  me  confidentially  that  the  telephone 
plant  account,  on  which  this  figure  is  based,  is  a  fictitious  account. 


54 

give  the  wages  of  telephone  operators  (in  the  largest  ex- 
changes only),  in  the  countries  named: 

Wages 
Per  Week 

Austria $3.00 

Belgium 2.60 

France   4.10 

German  Empire 4.60 

Great  Britain 2.65 

Switzerland   5.20 

The  above  are  for  a  minimum  wage,  the  maximum  aver- 
aging about  10  per  cent  more.  The  maximum  wage  in 
Europe  is  not  reached  until  after  from  ten  to  thirty  years 
of  service.  The  minimum  wage  in  the  City  of  New  York 
is  $6  a  week,  the  maximum  f  10,  and  the  average  in  general 
is  about  three  times  higher  than  the  average  rates  in 
Europe.  Then,  again,  we  should  not  lose  sight  of  the 
ability  of  the  people  to  pay  for  either  telegraph  or  tele- 
phone service.  As  the  average  weekly  wage  in  all  occupa- 
tions in  this  country  is  from  two  and  a  half  to  three  times 
that  of  Europe,  we  see  that  if  our  telephone  rates  were  two 
or  three  times  as  high  as  they  are  in  Europe,  from  a  rela- 
tive standpoint  they  would  be  the  same.  As  a  fact,  the 
telephone  rates  in  this  country  are  actually  cheaper  than 
upon  the  government  owned  lines  of  Europe. 

Here  is  a  table  that  gives  the  average  exchange  revenue 
per  station  in  terms  of  equivalent  American  dollars  in 
several  countries  equated  on  the  basis  of  operators  wages: 

Revenue  Revenue 

Austria $75.60     German  E'mpire $49.40 

Belgium  114.80     Great  Britain   59.30 

France 63.60     United  States  (Bell) . . .     30.95 

LOSSES  ON  GOVERNMENT  TELEPHONES. 

Another  important  point  not  alluded  to  in  Congress- 
man Lewis's  tables  is  the  annual  losses  on  government 
owned  telephone  systems.  For  instance,  in  Australia  the 
annual  deficit  amounts  to  over  a  million  dollars;  in  New 
Zealand  on  the  combined  telegraph  and  telephone  toll  serv- 


55 


ices,  for  five  years,  it  was  $318,000.  In  Austria  the  annual 
losses  on  post  office,  telegraph  and  telephone,  combined, 
amount  to  $500,000.  In  France,  on  the  telephone  alone 
the  loss  in  1905  (the  latest  figures  available),  was  $380,000, 
and  on  the  telegraph  $1,880,000.  In  the  Kingdom  of 
Bavaria  the  annual  loss  on  the  telephone  is  150,000  marks. 
From  1899  to  1909  inclusive  the  total  loss  on  the  Swiss 
Government  telephone  system  was  $1,327,647.  The  Gov- 
ernment telephone  and  telegraph  systems  of  Denmark  lost 
$395,000  from  1876  to  1911.  The  total  loss  on  the  Aus- 
tralian telegraph  and  telephone  since  it  was  socialized  has 
been  nearly  $20,000,000.  In  every  country  from  which  I 
have  been  able  to  get  any  information  there  is  an  annual 
deficit  in  both  telegraph  and  telephone  under  Government 
operation. 

An  important  fact  in  Congressman  Lewis's  compari- 
sons is  that  he  gives  in  almost  every  instance  the  maximum 
rates  in  this  country  and  the  minimum  rates  in  foreign 
countries.  For  instance,  he  gives  a  rate  for  the  telephone 
in  Los  Angeles  of  $63  a  year,  where  the  Bell  company  gives 
a  minimum  rate  in"  that  city  of  $36.  Indianapolis  is 
quoted  by  him  as  having  a  rate  of  $54  a  year,  but  the  Bell 
rate  for  minimum  service  for  business  is  $42,  and  for  resi- 
dence only  $18.  Mr.  Lewis  quotes  Seattle  as  having  a  rate 
of  $90,  but  the  Bell  company  gives  a  business  minimum 
rate  of  $54,  and  $24  for  residence.  He  quotes  a  rate  for 
Washington,  D.  C.,  at  $168  a  year,  yet  the  Bell  company 
has  rates  as  low  as  $30  in  that  city  for  both  business  and 
residence. 

Mr.  Lewis  does  not  show  the  proportion  of  subscribers 
having  maximum  and  minimum  rates.  His  comparisons 
for  long  distance  rates  are  also  worthless.  He  has  not 
mentioned  the  higher  cost  of  labor  in  this  country.  He 
does  not  show  the  losses  on  the  toll  service  in  Europe, 
losses  which  have  to  be  made  up  by  general  taxation.  In 


M 

some  instances  he  has  called  a  kilometer  a  mile,  whereas 
it  is  only  .62  of  a  mile. 

Mr.  Lewis  tells  us  that  the  toll  rate  in  Austria  is  38 
cents  for  all  distances ;  but  it  is  38  cents  for  100  miles,  61 
cents  for  300  miles,  and  81  cents  for  500  miles. 

Another  point  of  vast  difference  which  Mr.  Lewis  fails 
to  mention  is  the  fact  that  in  Europe  if  you  wish  to  talk 
with  a  particular  person  an  additional  charge  is  made;  in 
Germany  this  is  often  twice  the  regular  charge.  Nor  does 
he  mention  the  most  important  fact  of  all,  namely,  quick 
and  good  service.  The  average  time  to  complete  a  long 
distance  telephone  connection  in  this  country  is  about  five 
minutes,  but  between  large  cities  it  is  much  less.  From 
New  York  to  Philadelphia  the  time  is  only  70  seconds. 
Compare  this  with  the  half-hour  it  takes  for  London  to 
connect  with  Paris.  From  London  to  Liverpool  it  requires 
twenty-five  minutes;  London  to  Manchester,  twenty-five 
minutes;  London  to  Birmingham,  thirty-five  minutes,  and 
so  on.  In  Germany  it  requires  thirty-two  minutes  to  com- 
plete connection  between  Berlin  and  Cologne,  thirty-six 
minutes  between  Berlin  and  Paris,  and  thirty-five  minutes 
between  Berlin  and  Frankfort. 

The  figures  re  waiting  times  in  German  toll  service 
refer  to  1906.  The  German  Government  has  recently  at- 
tempted to  discredit  them.  Recent  and  official  statistics 
as  to  France,  however,  are  available,  and  are  as  follows: 

Average  Waiting 
Line  Time — Hours 

Paris-Berlin   % 

Paris-Brussels    1 

Paris-Zurich  2 

Paris-Marseilles  li/2 

Paris-Lyons 2 

Paris-Bordeaux    1^ 

Such  service  in  this  country  is  unthinkable.  In  almost 
every  instance  the  foreign  toll  rate  is  higher  than  in  the 
United  States.  In  this  connection  Sydney  Brooks  says : 

"In  almost  every  country  where  the  telephone  is  a  gov- 
ernment monopoly,  you  will  find  that  it  has  not  been  carried 
beyond  the  tentative  and  experimental  phase  that  America 


57 

left  behind  two  decades  ago.  More  rigid  and  with  Ies8 
initiative  than  private  corporations,  hampered  by  political 
considerations,  unwilling  to  concentrate  responsibility,  less 
disciplined  and  less  elastic  in  their  organizations,  the  gov- 
ernments of  Europe,  with  perhaps  two  exceptions,  have  made 
their  administration  of  the  telephone  a  synonym  for  all  that 
is  wasteful  and  incompetent.  They  pride  themselves  on  the 
comparative  cheapness  of  their  subscription  rates  and  call 
rates.  But  a  cheap  service  that  is  inefficient  and  backward 
is  far  worse,  from  the  standpoint  of  public  welfare,  than  a 
dearer  service  that  is  prompt  and  can  always  be  depended 
on.  I  would  rather  any  day  spend  ten  cents  (if  that  is  the 
charge  in  New  York),  and  be  sure  of  getting  it  at  once  than 
waste  four  cents  in  London  on  a  prolonged  babble  with  a 
stupid  operator,  insufficient  lines,  and  a  conversation — if 
any  conversation  ensues — that  is  only  audible  when  it  is 
interrupted." 

From  1901  to  1906  Glasgow  attempted  to  operate  a 
municipal  telephone,  but  it  was  a  lamentable  failure.  Not 
only  was  the  service  poor,  but  there  was  an  annual  deficit. 
During  the  five  years  of  its  operation  the  city  lost  $275,000, 
which  the  tax-payers  had  to  make  good,  and,  besides 
this,  the  city  lost  $58,000  on  the  sale  of  the  plant  to  the 
British  Post  Office. 

Publicly  owned  telegraphs  and  telephones  are  every- 
where characterized  by  wretched  service,  low  wages  to  em- 
ployees, use  by  but  a  small  percentage  of  the  population, 
and  large  annual  deficits. 

The  latest  reports  show  that  out  of  13,570,874  tele- 
phones in  use  in  the  world  the  United  States  has  8,729,592, 
and  out  of  33,261,934  miles  of  wire  the  United  States  has 
20,248,326. 

New  York  City  has  more  telephones  than  the  three 
great  cities  of  Paris,  Berlin  and  London  combined.  Con- 
gressman Lewis's  statement  that  with  government  owner- 
ship the  masses  will  be  enabled  to  use  the  telephone  more 
extensively  is  merely  the  talk  of  a  dreamer,  without  proof. 
Where  the  government  does  own  both  the  telegraph  and 
telephone,  it  is  not  the  masses  but  the  classes  that  mostly 
make  use  of  them. 


58 

Many  men  who  think  they  are  not  socialists  are  advo- 
cating government  ownership  of  the  telegraph,  the  tele- 
phone and  the  railroads,  but  they  fail  to  see  that  the  social- 
ization of  these  services  is  but  a  step  toward  the  socializa- 
tion of  all  the  means  of  production  and  distribution.  The 
government  ownership  advocate  is  a  socialist,  though  he 
may  not  know  it,  and  in  supporting  government  ownership 
of  the  railways,  the  telegraph  or  the  telephone  is  indirectly  ^ 
if  not  directly,  working  for  the  government  ownership  of 
your  store,  your  farm  and  shop,  and  most  important  of  all 
the  government  ownership  of  your  labor. 


59 


o 

z, 

D 

a. 

< 
& 
O 

w 

UJ 

H 


Z 


w  w 

ffi  2: 

L^      Q^ 

w 

SM 


w 
y 

^ 
o 

w 

H 


a 

U4 


CO 

.,  «M      CQ 

"S  c  S 

3 

*g 

0> 

0 
-3 

o3  s 
^1- 

a3  cri  ^ 

CO 

TH 

G<* 

c 

TH 

0 

CO 

o 

IO 

0 

00 

TH 

§ 

o 

c; 

H 

PM  3  H 

1 

5 

_0 

'-+3 

CO 
fl} 

M 

IO 
CO 
CO 

CN> 

o 

CO 

05 
Cv> 

00 
O5 

g 

Cv 

o 
co 

CC 

§ 

o 

0 

o 

§ 
& 

I 

1 
1 

05 
O 
00 

oo" 

CO 

CC 
0 

05 

0 
CO 

T-*. 

IO 

CO 

T—  1 

CO 

TH 

c^ 

«H      CO 

-4^     0     CJ 

^"S 

P5     —H       S 

^1 

0 

CO 

O     CS     J3 

o  -g  sb 

*_,  r~  j     O 
03  ^  ^ 

05 

0 

CL 

TH 

l-C 

H 

CO 

CO 

r— 

2> 

O 

CC 

I—I 

05 
0 

§  "^ 

1 

°l 

i 

1 

0 

10 

^ 

1 

TH 
TH 

CC' 

TH 

0 
CC 

2> 

00 

IO 

CC 

T— 

00 

o 

0 
0 

HH 

""a 
EH 

"I 

L^-_ 

CO 
0 
rH 

T—  ! 

£- 

co 

IO 

CC 

OO 

O5 

cr. 

CC 

CO 

co 

C: 

CC 

CO 

co 
0 

^H 

10" 

TH 

CO 

TH 

TtH 

OO 

«fH     CO 

"S      °      S 

f-i 

^3  K 

Si 

00 

CC 

1C 

rH 
2> 

CQ 

CC 

TH 

TH 

0 

»o 

00 

TH 

1 

CO      ^ 

+T 

^    H    r^ 

o 

s  )£j 

'co 

^^        ^"                     flj) 

PH   op2J 

'-3 

-+-»  CT1 

2 

K*   rT"T 

s 

2> 

2^_ 

CO 

CQ 

o 

O5 

CO 

o 

£ 

O3 

o>   f-i 

H 

FH 

O3 

CO 

s 

OS 

GO 
IO 

0> 

o: 

IO 

CO 

CO 

0 
0 

4s 

^      ^ 

nd 

^2 

co 

2> 

0 

TH* 

Cv> 

2> 

^t1 

00 

s 

L  '  -i-^ 

M 

a 

o 

CC 

05 

05 

G<> 

0 

^i. 

CO 

I-H 

cd 

?j 

CO' 

IO 

CC 

CO 

C: 

00 

N»  • 

^ 

TH 

^ 

®* 

^ 

0 

CO 

T— 

T— 

CO 

41 

M 

TH 

0 

GQ 

CO 

o 

s  g 

10 

cr: 

CC 

CO 

CO 

o 

CO 

CC 

CC 

0 

c 

IO 

0 

0 

t3    ^ 

TH 

N 

CO 

TH 

OJ 

IO 

CO 

CO 

»H  i—  < 

TH 

O 

O5 

0 

T-H 

CO 

r      O3 

0 

CC 

CO 

CC 

00 

-T_ 

CO 

CC 

•—  • 

CO 

** 

IO 

CO 

CO 

O   *H 

IO 

co 

CQ 

05 

CC 

CQ 

CO 

T""H 

T"H 

1 

OS 

OQ 

i  .5 


O5O5O5O5O5O5O:ai 


C/5 

DQ 

cu 
w 

OQ 


§ 

o 

a 


^       QJ       G3        W  •     «r-« 

i  *§  43   g  ^.43 

Oft     N     O   T*     C  ' — i      to 

^    ,0      fe      ^      O  ^      ?! 

rn  r*r  ^H 


'O    iJ 


fl       2 
|       | 

W         £ 


»  O  C 


MUNICIPALIZATION    OR    A    JUST 

REGULATION?    A  PLEA  FOR 

THE  FACTS. 

J.  W.  SULLIVAN. 

Dr.  Howe,  in  his  "European  Cities  at  Work/'  gives 
recognition  to  a  generous  scope  for  municipalism.  His 
program  takes  in,  for  the  field  of  economics,  municipal 
transit,  gas,  electricity,  water,  telephones,  dwellings, 
ferries,  river  boats,  markets,  slaughter  houses,  bakeries, 
savings  banks,  pawn  shops,  house-renting  agencies,  and 
public  works  departments;  and,  for  the  field  of  social  wel- 
fare, for  adults,  theatres,  music  halls,  rathskellers,  legal 
aid  offices,  and  employment  bureaus  having  on  sale  food 
and  beer,  and,  for  children,  playgrounds,  milk  depots, 
medical  attention,  and  feeding  at  school.  This,  the  doctor 
holds,  is  a  "happiness  program." 

The  time  at  our  disposal  to-day  permits  us  to  take  up 
for  consideration  only  a  few  of  the  municipal  projects 
which  the  doctor  advocates.  We  select  the  undertakings 
requiring  in  their  operation  a  fixed  and  exclusive  use  of 
the  highways,  such  as  gas,  electricity,  and  street  railways. 
The  doctor  demands  for  these  municipalization  through- 
out, in  order  to  establish  conditions  which  shall  result  in 
the  highest  common  good.  This  principle  calls  not  only 
for  a  community  ownership  of  the  highways  but  also  a 
community  ownership  and  operation  of  the  undertakings. 
The  principle  is  thorough  communism  in  the  proposed 
scope  of  activity. 

Against  this  principle  stands  another,  which,  recog- 
nizing the  common  ownership  of  the  highways  as  essential 
for  movement  of  man  and  his  belongings  from  place  to 
place,  demands,  in  order  to  establish  conditions  which  shall 
result  in  the  highest  common  good,  the  forms  of  cornpeti- 


61 

tion  in  ownership  and  operation  of  these  undertakings 
which  experience  has  shown  to  be  practicable.  Under  this 
principle,  franchise,  contract  and  regulation  would  be  the 
bases  for  the  public  work  which  requires  an  exclusive 
occupancy  of  the  highway.  The  community,  as  owner  of 
the  highways,  would  prescribe — clearly,  sharply  and  fully 
— private  operation,  evading  grants  of  monopolistic  powers 
by  stipulating  prices  and  character  of  the  service.  The 
community  would  permit  the  capital  engaged  in  such  oper- 
ation to  earn,  if  it  could:  1.  Current  interest  on  invest- 
ment in  the  working  property  for  an  enterprise.  2.  Wages 
of  superintendence  and  labor.  3.  Compensation  for  risk 
in  initiation  and  maintenance.  4.  Fair  yield  from  the  in- 
crease of  business,  or  economy  of  operation,  arising  from 
energy  in  administration  and  improvements  in  methods 
and  machines.  Further,  the  community  would  guarantee : 
5.  Preservation  of  the  due  regard  for  vested  interests  nec- 
essary for  an  established  confidence  in  the  rectitude  and 
integrity  of  organized  authority.  Manager  and  investor 
must  have  guarantee  that  where  they  sow  they  may  reap. 

This  principle  of  regulation,  with  its  essential  partic- 
ulars as  just  given,  was  maintained  by  the  representative 
private  operators  of  public  utilities  in  the  United  States 
who  were  on  The  National  Civic  Federation  Commission 
of  eight  years  ago.  Through  such  regulation  the  com- 
munity and  the  franchise  holders  would  be  expected  to 
achieve  the  recognized  benefits  arising  from  the  principle 
of  free  industry. 

We  have  here  two  principles,  two  methods,  two  social 
ideals — economically  irreconcilable  and  socially  antithetic. 
Strangely,  in  this  enlightened  age  of  official  reference 
books,  engineers'  and  auditors'  trade  periodicals,  and  con- 
tinuous investigations,  the  controversialists  supporting 
these  opposing  principles  give  the  public  two  widely  vary- 
ing stories  of  the  civilized  world's  experiences  in  munici- 
palization. 

The  citizen,  in  his  struggle  to  understand  this  problem 


62 


and  form  a  fair  judgment  upon  it,  is  of  a  certainty  entitled 
first  of  all  to  a  knowledge  of  the, decisive  facts  in  the  case 
as  up  to  the  present  developed.  Dr.  Howe,  in  "European 
Cities  at  Work,"  has  voluminously  given  his  testimony  on 
municipal  ownership,  and  the  present  is  an  occasion  to 
examine,  in  some  of  its  most  salient  points,  the  value  of 
that  testimony. 

One  of  the  most  highly  important  of  Dr.  Howe's  state- 
ments (page  339)  is  that  in  1910  the  municipally  owned 
street-railways  of  the  United  Kingdom  carried  2,102,- 
483,000  passengers,  who  paid  on  the  average  2.1  cents  fare, 
amounting  to  $47,437,170,  and  that  "had  these  car  riders 
paid  the  average  fare  of  five  cents  charged  in  America  they 
would  have  paid  $105,124,150."  Here  is  an  alleged  differ-' 
ence  in  one  year,  to  the  disadvantage  of  American  street- 
car fare-payers,  of  $57,686,980.  But,  the  doctor's  com- 
parison overlooks  two  facts  that  count  heavily  in  street-car 
fares;  first,  that  only  a  small  percentage  of  the  British 
municipal  tramway  systems  issue  free  transfers,  and  sec- 
ondly, that  besides  giving  transfers  many  American  street- 
car systems  sell  six,  and  at  least  one  large  city  seven, 
tickets  for  twenty-five  cents. 

On  a  British  tramway  system — let  Glasgow  be  taken 
as  the  example  most  favorable  to  municipalizers — a  car- 
rider  going  on  a  one-way  double-elbow  trip  requiring  two 
changes  of  cars  pays  three  fares,  and  on  returning  three 
more.  In  the  tramway  reports  his  round  trip  consequently 
counts  him  as  six  passengers.  In  America — take  New 
York  as  an  example — a  passenger  on  a  similar  broken 
journey  may  make  his  two  changes  of  cars  by  a  double 
transfer  on  a  single  fare.  His  return  trip,  with  its  two 
changes,  he  makes  on  one  more  fare.  In  the  reports  for 
revenue  producing  traffic,  he  figures  for  the  round  trip  a* 
only  two  passengers,  instead  of  Glasgow's  six. 

No  record  is  possible  of  the  number  of  British  passen- 
gers paying  fare  after  fare  either  on  a  single  or  a  round 
trip.  But  in  the  larger  American  cities,  by  the  state  re- 


ports,  the  proportion  of  transfers  to  cash  fares  rises  to  40 
per  cent,  and  for  the  entire  country,  by  the  census  reports,  it 
is  more  than  20  per  cent.  Since  the  British  municipal  tram- 
way systems  are  generally  in  the  larger  cities,  with  small 
suburban  extensions,  at  somewhat  the  same  ratio  the  riders 
paying  fares  who  in  America  would  get  transfers  may  be 
30  per  cent.  That  proportion  would  reduce  the  British 
passengers  paying  a  five-cent  fare  in  this  country  from 
2,102,483,000  to  1,471,738,100,  yielding  $73,586,905,  and 
not  $105,124,150,  Dr.  Howe's  figures.  But,  again,  if  only 
10  per  cent  of  the  1,471,738,100  passengers  were  to  ride  on 
six-for-a-quarter  tickets,  the  $73,586,905  would  be  cut  down 
further  by  more  than  $3,500,000,  reducing  the  $105,124,150 
to  about  $70,000,000.  The  doctor's  error  in  his  comparison 
as  to  fares  would  on  these  estimates  be  at  least  $35,000,000. 
Reduce  them  by  25  per  cent  and  we  have  left  for  his  error 
more  than  $25,000,000.  As  to  the  passenger's  outlay  and 
the  character  of  service  given  him,  if  the  fare  for  long 
rides  and  the  convenience  through  length  and  spread  of 
trackage  is  not  considered,  a  grave  error  of  omission  is 
made.  On  the  point  of  the  total  mileage  of  the  rides  of  all 
the  passengers,  no  statistics  are  possible,  but  comparison 
as  to  the  mileage  of  track  per  route  and  per  system  can 
be  shown.  Glasgow's  longest  route  is  a  fraction  short  of 
fifteen  miles,  the  round-trip  fare  being  28  cents.  (W.  D. 
Mahon,  Report  to  the  American  Federation  of  Labor.) 
New  York's  longest  route  one  way  is  not  far  from  equaling 
Glasgow's  ordinary  round-trip,  and  it  costs  only  five  cents. 
Glasgow's  whole  tramway  system  in  1914  has  194  miles  of 
track;  Boston,  with  about  one-fourth  less  population,  has 
470  miles.  Glasgow  has  one  mile  of  track  per  5,154  inhab- 
itants ;  Philadelphia  one  mile  per  2,350,  immeasurably  the 
greater  accommodation.  For  distances  beyond  5.8  miles 
Glasgow's  fares  are  higher  than  the  American  five-cent 
fare.  In  all  British  cities,  except  Glasgow,  tramway  fares 
for  distances  above  five  miles  are  higher  than  five  cents. 
In  all  British  cities,  fares  beyond  three  and  a  half  miles 


are  usually  higher  than  the  American  fare  and  the  transfer. 
To  sum  up,  for  all  areas  beyond  three  and  a  half  miles, 
American  cities  have  the  cheaper,  and  they  have  by  far 
the  more  convenient  service.  Even  the  fare  per  passenger 
per  mile  of  the  American  systems,  as  computed  by  Amer- 
ican companies,  is  less  than  Glasgow's  lowest  zone  fare  per 
mile.  It  is  to  be  borne  in  mind  besides  that  five  cents 
counts  less  in  the  American  wrage-worker's  wage  than 
three  cents  in  the  British  wage-worker's  wage.  British 
tramway  systems  have  little  suburban  and  next  to  no 
interurban  service.  They  invariably  stand  second  to 
American  systems  in  speed,  headway,  car-lighting,  and  in 
an  all-night  service.  European  city  transit  managers  are 
abandoning  the  rule  of  a  seat  for  every  passenger,  borrow- 
ing from  America  the  practical  idea  that,  especially  in  rush 
hours  when  all  the  cars  possible  are  run,  the  extra  people 
wrant  to  travel  speedily  to  their  destination  standing  in  the 
cars  rather  than  to  lose  time  and  endanger  their  health 
standing  on  the  street  corners  waiting  exposed  to  the 
weather.  The  cities  of  Great  Britain,  after  American 
companies  had  for  a  decade  conducted  electric  street  rail- 
way operation  through  its  early  stages  at  a  cost  of  millions 
of  dollars — the  so-called  wastage  of  experimentation — took 
without  payment  the  costly  scientific  results  of  American 
initiative  and  enterprise  and  only  then  set  up  their 
electric  systems,  beginning  their  work  with  American  engi- 
neers and  buying  their  supplies  from  America.  If  superi- 
ority in  extent  of  development  signifies  superiority  in  the 
elements  that  insure  development,  America,  with  40,070 
miles  of  street  railway  trackage  has  no  need  in  1914  to 
stand  apologetically  or  in  the  attitude  of  humble  tutelage 
before  Great  Britain  with  4,303  miles.  Let  the  full  com- 
pass of  all  the  relevant,  significant,  and  decisive  facts,  such 
as  the  foregoing,  be  brought  into  view  in  comparison  be- 
tween British  municipal  and  American  company  street-car 
systems. 

Electricity  municipalized  stands  high  in  Dr.  Howe's 


05 

favor.  Forty-four  of  the  fifty  largest  cities  in  Great 
Britain,  he  writes,  have  municipal  electric  plants,  but  with 
what  results  he  does  not  mention.  On  the  other  hand,  in 
"London  Municipal  Notes,"  January,  1914,  is  this  state- 
ment: "The  return  on  last  year's  working  on  electricity 
undertakings  belonging  to  municipalities  showed  that  45 
were  being  run  at  a  loss  to  the  ratepayers."  In  an  analysis 
of  the  Census  of  Production  report  on  electricity,  the  Lon- 
don Municipal  Society  publishes  the  statement  that  if  the 
municipal  electricity  undertakings  of  the  United  Kingdom 
were  taken  over  by  companies  the  cost  to  the  consumer 
would  be  lowered  by  $800,000,  the  basis  of  this  inference 
being  the  census  cost  per  unit  as  sold  by  company  and 
public  authority.  In  the  United  States,  the  ninth  edition 
of  "Defunct  Municipal  Lighting  Plants,"  1913,  gives  a 
sketch  of  212  municipal  electric  plants  that,  after  trial, 
usually  financially  disappointing,  have  been  passed  over  to 
companies.  A  United  States  Census  report  of  1912  gives 
the  operating  expenses  per  $1,000  gross  income  of  commer- 
cial (company)  and  municipal  central  stations:  Fuel — 
Commercial,  $109.12;  municipal,  $188.44.  Supplies,  ma- 
terials, wages,  and  certain  miscellaneous  expenses — Com- 
mercial, $298.29 ;  municipal,  $373.67.  Taxes — Commercial, 
$47.03 ;  municipal,  $1.34.  Rent  of  offices,  conduits,  under- 
ground privileges  and  water — Commercial,  $15.14;  munic- 
ipal, $3.02.  The  story  of  these  figures  is  that  in  purchas- 
ing and  in  the  number  of  employees  the  outlay  of  the  com- 
panies runs  far  below  that  of  the  municipalities,  while  in 
the  items  by  which  the  accounting  may  be  confused  or 
evaded  the  municipalities  can  insert  small  figures  and  post- 
pone the  final  day  of  exact  reckoning.  The  net  income  of 
the  central  stations  in  1912  was — Commercial,  $46,814,837; 
municipal,  $6,301,824.  The  attention  of  a  Congressional 
Committee  has  been  directed  to  a  computation  that  if  the 
commercial  stations  had  charged  municipal  rates  their  in- 
come would  have  been  more  than  quintupled,  $259,985,014; 
while  if  the  municipal  stations  had  charged  no  more  than 


66 

cainmtrcial    rates    there    would    have   been    a   deficit   of 
$3,461,243. 

In  his  chapter  on  gas,  Dr.  Howe,  taking  his  figures 
from  the  "Municipal  Year  Book,"  1912,  after  stating  that 
the  average  price  of  company  gas  in  the  United  Kingdom 
is  66  cents,  or  ten  per  cent  more  than  municipal  gas,  gives 
in  a  second  table  a  list  of  fifteen  cities  which  sell  municipal 
gas  below  60  cents,  but  he  prints  no  table  of  companies 
which  sell  gas  below  60  cents.  Against  the  doctor's  pre- 
sentation of  the  case  stands  a  comparative  table  published 
by  the  Secretary  of  the  London  Municipal  Society,  in  which 
in  1909  the  price  of  the  gas  of  twelve  principal  municipal 
undertakings  (nine  of  them  being  represented  in  Dr. 
Howe's  table)  is  shown  as  against  the  price  of  ten  principal 
companies  in  the  Kingdom.  The  average  price  for  these 
ten  companies  was  seven  cents  lower  than  the  average  for 
the  twelve  municipalities.  The  municipalities  had  the  ad- 
vantage of  a  population  of  four  and  a  half  millions  against 
two  millions  for  the  companies.  The  manager  of  the  Brad- 
ford Municipal  gas  works,  as  President  of  the  Institution 
of  Gas  Engineers,  viewing  all  England  as  the  scene  of  gas 
production,  said  in  his  annual  address  in  1906:  "The 
large  majority  of  gas  works  owned  by  local  authorities 
were  in  the  North  and  Midlands,  and  principally  in  the 
manufacturing  districts,  where  they  had  many  advantages. 
On  the  other  hand,  the  companies  predominate  in  the 
South.  It  is  interesting  to  note  that  there  were  two  coun- 
ties in  the  South  of  England  [where  coal  is  high  in  price] 
in  which  105  gas  companies  were  established,  but  where 
there  was  not  a  single  gas  undertaking  owned  by  a  local 
authority."  The  Secretary  of  the  London  Municipal  So- 
ciety says  that  municipalities  have  occupied  the  richest 
fields  of  trade,  the  populous  communities  near  coal  fields; 
the  companies  are  the  pioneers  in  poor  and  unremunerative 
areas;  the  municipalities  make  up  their  shortages  on  con- 
sumers' prices  by  taking  the  best  prices  for  their  own  street 
lighting ;  the  difference  in  the  quality  of  gas  is  in  favor  of 


67 

the  companies;  and  the  losses  on  municipal  gas,  where  they 
occur,  must  be  made  up  by  the  taxpayers.  Further,  the 
Secretary  says  the  Government  authority,  the  "Parlia- 
mentary Returns,"  give  no  such  figures  for  average  prices 
as  those  quoted  by  Dr.  Howe  from  an  annual  which  leans 
to  municipalist  propaganda.  The  Government  figures 
showed,  in  1909,  219  municipal  gas  undertakings  and  499 
company  undertakings,  and  the  fallacy  of  an  average  price 
of  company  gas  for  the  Kingdom  is  seen  on  looking  over 
the  long  list  of  small  towns,  some  in  remote  districts  in 
Ireland,  where  the  price  runs  up  to  a  dollar  or  more,  each 
a  unit  to  be  compared  with  the  municipal  units  represent- 
ing the  cream  of  the  business.  Comparing  like  with  like, 
the  London  Municipal  Society's  Secretary  says,  "The  gas 
supplied  by  companies  is  cheaper  than  that  supplied  by 
municipalities." 

Dr.  Howe's  studies  of  the  municipal  market  systems 
of  London,  Paris  and  Berlin  have  permitted  him  to  deal 
with  statistics  relative  to  them  after  his  manner  with  tram- 
way figures.  "All  London,"  he  says  (page  314),  "with 
its  7,000,000  people,  is  dependent  upon  Co  vent  Garden 
Market,  owned  by  the  family  of  Bedford,  from  which  the 
present  Duke  enjoys  a  princely  revenue;  and  so  powerful 
are  the  present  owners  that  the  London  County  Council  has 
never  been  able  to  secure  the  right  to  open  a  market  of 
its  own  even  on  the  land  which  it  already  possesses."  The 
printed  official  reports  show  that  the  City  of  London's 
public  system  of  wholesale  meat,  poultry,  fish,  cattle,  and 
provision  markets,  located  in  various  parts  of  London 
County,  cost  more  than  twenty  million  dollars,  while  with- 
in the  boundaries  of  London  County  there  are  110  public 
retail  open  markets.  Smithfield,  the  largest  public  market, 
sells  at  wholesale  41  per  cent  of  all  the  meat  sold  in  Great 
Britain.  Billingsgate  is  the  public  wholesale  fish  market, 
not  only  for  London,  but  the  southeast  of  England.  Covent 
Garden,  as  a  fact,  sells  no  meat,  fish,  poultry,  or  butter, 
cheese  and  eggs.  It  is  a  fruit,  flower,  and  vegetable  mar- 


68 


ket,  less  than  two  acres  in  area.  The  princely  revenue  of 
the  Duke  of  Bedford  from  Covent  Garden  is  a  wild  guess 
touched  up  with  a  rhetorical  flourish.  The  Bedford  estate 
office  never  made  any  reports  on  the  property,  and  the 
testimony  given  by  the  Duke's  agents  years  ago  indicates  a 
probability  that  not  even  ordinary  interest  came  from  the 
investment.  The  Bedfords,  in  fact,  offered  four  times  to 
sell  the  market  to  the  London  County  Council  and  its  pre- 
decessor, the  Metropolitan  Board.  With  much  other  of 
the  Duke's  real  estate  of  the  locality,  it  has  within  the  last 
year  been  sold  twice,  and  the  London  County  Council  made 
no  bid  for  it. 

Of  the  Berlin  market  system  Dr.  Howe  writes :  "There 
are  now  fourteen  city  markets  in  substantial  buildings,  and 
so  located  as  most  easily  to  distribute  the  incoming  farm 
produce  of  the  railways,  river,  and  canal  ways  to  the  retail 
dealers  and  consumers  of  the  city."  What  are  the  facts? 
Four  of  Berlin's  fifteen  market  houses  are  closed;  four 
other  barely  pay  their  way,  as  shown  by  the  testimony  of 
the  municipal  books.  In  1911,  eight  of  these  market  houses 
had  less  than  half  their  stalls  occupied.  Counting  interest 
on  investments  the  entire  system  has  lost  $20,000  a  year 
the  last  four  years.  The  failure  of  the  system  in  its  at- 
tempted function  of  distribution  was  due  to  the  superior 
advantages  to  the  community  afforded  by  the  department 
store  and  other  private  markets. 

Of  the  Paris  markets,  Dr.  Howe  states:  "The  total 
revenue  from  the  system  of  central  and  local  markets  in 
1906  was  $1,817,164,  and  the  total  expenses  $318,923,  leav- 
ing a  profit  of  $1,498,241."  The  official  report  of  the 
markets  bureau  of  Paris  shows  year  by  year  receipts  of 
about  twro  million  dollars  from  the  Central  Halls,  the  local 
markets,  the  cattle  markets,  the  slaughter  houses,  the  great 
wine  depots,  etc.,  scattered  about  in  many  parts  of  Paris, 
the  entire  plant  costing  $30,000,000.  The  receipts  from 
the  Central  Halls  and  the  local  markets  together  have 


69 

never  reached  within  $600,000  of  the  $1,817,164  alleged  bj 
Dr.  Howe.     The  official  reports  set  forth  no  profits. 

The  financial  differences  between  Dr.  Howe's  reports 
of  the  Berlin,  London,  and  Paris  markets  and  the  official 
reports  run  up  into  millions  of  dollars.  The  municipal 
market  systems  of  the  three  cities  all  lose  money. 

But,  if  municipalization  has  so  turned  out  in  the  lead- 
ing features  just  particularized,  how  did  it  ever  reach  its 
present  stage?  The  reply  requires  a  correct  appreciation 
of  just  what  that  present  stage  amounts  to  in  Europe.  In 
reality,  municipalism  has  made  far  less  advance  over  there 
than  the  talk  about  it  might  indicate.  The  transit  systems 
of  Berlin  and  Paris  are  not  run  by  the  municipalities — 
neither  the  elevated  road  nor  the  trams  or  stages  of  Berlin, 
nor  the  subways,  trams,  or  omnibuses  of  Paris.  Nor  are 
the  underground  railroads  or  the  omnibus  lines  of  London. 
The  gasworks  of  these  three  cities  are  also  operated  by 
companies.  So  are  in  number  approximately  five-sevenths 
of  all  the  gasworks  of  Great  Britain.  In  Germany,  134 
tramway  lines  are  managed  by  companies  to  75  by  local 
administrative  bodies;  in  Switzerland,  the  proportion  is 
33  to  8.  In  France  there  are  no  street-car  systems  munic- 
ipally operated  and  few  of  other  great  undertakings.  In 
Great  Britain,  it  is  to  be  borne  in  mind,  the  cities  which 
have  municipalized  their  tramways  mostly  inherited  them 
on  the  expiration  of  company  leases.  The  cities  took  over 
the  old  company  property,  as  commonly  said,  at  "a  scrap- 
iron"  valuation ;  they  bought  the  new  equipment  for  their 
roads  from  American  companies,  and  they  acquired  modern 
American  ideas,  developed  at  the  cost  of  American  com- 
panies, without  price. 

High  tide  in  the  propaganda  of  municipalism  in  Great 
Britain  was  reached  a  decade  ago.  In  1901,  a  leaflet  issued 
by  the  London  advocates  of  municipal  ownership,  speaking 
of  the  then  new  London  municipal  tramway,  announced: 
"The  system  is  now  earning  £100,000  per  annum  .  .  . 
It  is  estimated  that,  at  no  distant  date,  from  £15000,000 


70 

to  £2,000,000  per  annum  may  be  secured  from  the  electri- 
fied Progressive  tramways  of  the  Metropolis."  The  actual 
results  have  been  that  from  1897  to  1903  revenues  from 
the  system  were  applied  to  the  relief  of  local  taxes  to  the 
amount  of  £300,000,  all  of  which  sum,  according  to  the 
findings  of  an  official  commission  in  1908,  ought  to  have 
been  applied  to  the  liquidation  of  debts  contracted  at  the 
organization  of  the  system.  From  1903  to  1907  there  were 
no  profits.  On  last  year's  operation  the  deficits  were 
|440,000. 

The  bright  side  of  municipalization  (the  theoretical 
and  prophetic)  was  much  on  exhibition  in  the  era  of  that 
famous  leaflet — before  jarring  experience  turned  around 
the  dark,  unpleasant  side  (the  results  of  practice)  to  the 
disappointment  of  the  prophets  and  the  disgust  of  com- 
munities. That  bright  side  was  seen,  in  its  alluring  glitter, 
before  the  birth  and  death  of  the  municipal  Thames  river 
boat  system,  loss  $1,500,000;  before  Glasgow's  municipal 
telephone  venture,  loss  f 275,000 ;  before  the  deficits  of  va- 
rious British  municipal  tramways  amounted  to  f 250,000 
in  a  year;  before  the  enforced  closing  of  the  London  County 
Council  works  department,  loss  $150,000,  and  its  furniture 
factory,  through  failure  to  compete  with  contractors;  be- 
fore it  was  demonstrated  by  time  that  every  municipal 
dwellings  system  in  England  was  a  financial  failure  and 
Miss  Octavia  Hill  showed  why;  before  the  municipal  in- 
debtedness in  Great  Britain  rose  in  ten  years  from  $1,945 
to  $4,585  per  100  of  population ;  before  the  intricacies  and 
the  evasive  overlapping  in  municipal  bookkeeping  were 
made  plain  to  the  public — such  as  charging  to  the  street 
department  the  street  opening  and  paving  for  municipal 
tramways  where  companies  were  obliged  to  defray  this 
outlay,  and  reducing  to  an  absurd  entry  the  annual  loss 
through  depreciation,  and  making  little  or  no  allowance 
for  city  auditing,  policing,  clerical  work,  and  committee 
managing;  before  the  Socialists  of  London  and  the  Single 
Taxers  of  Glasgow  declared  that  municipalization  had  had 


71 

no  effect  on  poverty  and  was  "mere  municipal  capitalism;" 
before  the  reaction  in  South  Germany,  where  the  news- 
papers recently  published  a  list  of  forty-two  towns  in  which 
municipal  majorities  or  parties  expressed  themselves  either 
against  any  extension  at  all  of  municipal  trading  or  against 
particular  objects ;  before  the  utter  failure  of  municipalism 
in  France  and  the  majority  votes  against  it  after  trial  in 
Lille,  Marseilles,  Toulon,  Dijon,  and  Elbeuf,  the  Mayor  of 
the  last-named  city,  an  estimable  municipal  enthusiast, 
committing  suicide  when  his  theories  terminated  in  general 
disaster;  before  the  Syndicalists  of  France,  obtaining  a 
steady  majority  in  the  national  labor  conventions,  merci- 
lessly flouted  the  vote-huckstering  municipal  misleaders  of 
the  masses;  before  London  turned  out  for  good  its  munic- 
ipalist  majority  from  the  County  Council,  which  happened 
seven  years  ago.  Yet  Dr.  Howe  could  write  in  his  book 
in  1913  that  the  British  "official  who  would  propose  a  re- 
turn to  private  management  would  probably  not  survive 
the  next  election." 

In  the  United  States  there  has  been  a  chapter  of  mu- 
nicipal ownership  happenings  which  deserves  to  be  borne 
in  mind,  though  regarding  it  the  promoters  of  munici- 
palism seem  to  have  adopted  the  motto,  "Forget  it."  New 
York  has  that  grand  object  lesson  the  municipal  ferry  sys- 
tem, loss  in  nine  years,  $4,500,000;  it  has  had  a  reform 
municipal  ownership  group  of  eleven  aldermen,  price  of 
their  vote,  confessed  in  court,  $5,500;  it  has  had  a  munic- 
ipal electric  lighting  system  now  completely  extinguished, 
combined  with  a  municipal  rubbish  incinerating  plant,  loss 
$109,000 ;  it  has  several  monumental  city  and  county  build- 
ings, perfect  models  in  their  unsuitableness  of  construction 
and  wastefulness  of  administration,  to  be  admirably  stud- 
ied by  municipalists.  Chicago's  Sanitary  District  electric 
lighting  plant  has  lost  $210,000  in  a  year;  Detroit,  Syra- 
cuse, Wheeling,  Philadelphia,  Seattle,  Cedar  Rapids,  and 
Richmond  have  beautiful  records  of  municipalization  to  be 
profitably  perused.  No  more  significant  event  in  the  con- 


72 

troversy  over  municipal  ownership  lias  occurred  than  the 
investigation  carried  out  by  The  National  Civic  Federation 
Commission  of  twenty-one  in  1905-7,  of  which  seven  literary 
members  had  previously  been  attracted  to  the  support  of 
niunicipalization — three  of  whom,  indeed,  were  among  its 
foremost  advocates  in  this  country.  When,  after  nearly 
two  years  of  preparation  and  investigation,  the  formal, 
decisive,  and  final  vote  on  the  question  was  taken  by  the 
twenty-one,  every  member  declined  to  advise  this  country 
to  take  up  with  municipal  ownership.  It  may  be  ventured 
that  with  the  findings  of  that  commission  the  positive  trend 
was  taken  in  America  toward  the  principle  of  a  just  and 
efficient  regulation.  Since  then  regulation  has  trimmed 
many  a  company  of  its  privileges  or  prevented  many  an- 
other from  obtaining  undue  privileges,  with  a  financial 
saving  to  the  public  beyond  calculation. 

The  status  of  labor  under  municipal  ownership,  as  type 
and  example  of  a  condition  possible  to  labor  generally 
under  government  ownership,  is  of  a  higher  social  im- 
portance than  dollars  lost  or  gained.  An  American  liter- 
ary municipalizer  writes  in  a  magazine  concerning  Euro- 
pean communities  that  they  "would  not  permit  a  soulless 
corporation  to  plunge  the  city  into  periodic  miniature  civil 
war  because  of  a  dispute  regarding  wages  or  hours."  The 
municipal  car-men,  he  says,  occupy  much  the  same  position 
as  mail-carriers  or  policemen.  True,  strikers  against  mu- 
nicipalized undertakings  are  treated  as  mutineers;  the 
position  of  the  municipal  wage-working  employee  is  that 
of  a  common  soldier  directed  by  a  drill  sergeant,  whose 
whip  is  a  discharge  which  closes  to  the  man  other  municipal 
employment  everywhere.  Among  the  assumed  certainties 
of  the  early  theoretical  municipalizers  was  that  municipal 
employees  would  not  or  could  not  strike.  But  bitterly 
contested  tramway  strikes,  viewed  by  the  authorities  as 
rebellions,  has  taken  place  in  the  last  four  years  in  Leeds, 
Stockport,  Blackburn,  Cardiff,  Oldham,  Liverpool,  and 
Glasgow.  After  the  Glasgow  strike  of  1911,  400  of  the 


73 

strikers  were  victimized  and  never  allowed  to  return  to  the 
service,  and  after  the  strike  in  Leeds  in  1913  practically 
the  entire  tramway  force  was  similarly  victimized.  In 
Glasgow,  in  the  seven  years,  1901-8,  1,228  traffic  employees 
were  dismissed  and  2,384  resigned,  a  number  equivalent  to 
a  change  of  the  entire  traffic  force  every  four  years,  testi- 
mony to  an  unhappy  situation.  The  Glasgow  tramway 
management,  maintaining  an  open  shop,  permits  no  labor 
union  of  employees  to  exist  and  no  employees  to  take  part 
in  politics.  Were  all  Britain  to  imitate  the  attitude  of 
Glasgow's  municipal  committee  and  managers  toward 
labor,  no  employee  would  be  permitted  to  exercise  his  full 
rights  of  citizenship,  no  man  would  be  taken  on  at  work 
without  a  civil  service  examination,  no  trade  agreement 
could  be  thought  of,  no  liberty  of  association  among  the 
wage- workers  could  exist,  no  work  at  his  trade  could  be 
found  by  a  man  once  blacklisted,  and  no  labor  movement 
would  be  tolerated  in  the  country.  Striking  through  poli- 
tics was  attempted  in  Great  Britain  by  a  Municipal  Em- 
ployees' Society,  its  stealthy  weapon  the  menace  of  a  knif- 
ing vote,  but  the  body  was  repudiated  by  the  British  central 
trade  union  organization.  Thus  municipalism  has  carried 
ruin  to  labor  organization,  in  both  its  economic  and  polit- 
ical forms. 

It  is  well  for  the  wage-workers  of  this  country  that  every 
year  the  American  Federation  of  Labor  sends  two  of  its 
prominent  members  to  Great  Britain  and  some  years  more 
than  two.  All  return  vividly  impressed  with  the  vigor, 
vitality,  and  social  value  of  American  ideas,  principles,  and 
methods.  One  pertinent  example:  W.  D.  Mahon,  the 
President  of  the  organized  street-car  employees  of  America, 
just  returned  from  an  investigation,  has  reported  to  the 
American  Federation  of  Labor  that  in  his  occupation 
money  wages  in  the  United  States  are  100  per  cent  above 
the  highest  paid  in  Europe,  that  there  is  no  appreciable 
difference  between  the  wages  paid  by  companies  and  munic- 
ipalities, and  that  the  tramway  systems  of  Europe  are  not 


74 

to  be  compared  with  the  street  railway  systems  of  the 
United  States.  "The  American  system,"  he  says,  "  is  not 
only  cheaper  to  the  public,  all  things  considered,  but  the 
service  is  better,  with  a  great  deal  more  of  it."  Wages  for 
the  municipal  employees  in  Great  Britain  have  not  been 
advanced  at  a  quarter  of  the  rate  that  they  have  been  for 
the  street-car  men  in  America  through  the  methods  of  the 
trade  unions  dealing  with  business-like  employers,  man- 
fashion,  equals  with  equals,  buyers  and  sellers  in  the  labor 
market. 

Municipalism  breaks  down  trade  union  principles;  it 
substitutes  for  them  a  one-sided  dictation  which  strips 
labor  of  independent  action  in  its  own  behalf,  clothes  man- 
agers with  the  powers  of  an  upper  caste  backed  by  the 
forces  of  law,  and  to  the  extent  that  it  prevails  establishes 
in  society  a  condition  destructive  of  democracy.  On  that 
score  alone,  the  American  wage-worker  needs  only  to  have 
experience  with  it  to  reject  it.  But  the  American  wage- 
worker,  a  citizen  with  the  cause  of  his  country  at  heart, 
may  be  depended  on  to  weigh  the  facts  in  general  relative 
to  municipalisrn,  when  he  finally  obtains  access  to  them, 
and  render  fair  judgment  in  the  case.  Further,  whatever 
is  to  be  said  of  contests  over  wages  or  of  the  social  unrest, 
it  is  usually  a  fact  that  American  employees  regard  their 
employers  as  friends  for  whose  rights  they  will  contend  as 
they  would  for  their  own,  and  if  municipalism  is  to  be  built 
up  on  abuse  of  the  employer  and  depriving  him  of  any  of 
his  just  rights  it  to-day  stands  small  show  of  success. 

The  "temporary  lull"  in  the  advance  of  municipalization 
in  Great  Britain,  admitted  nearly  a  decade  ago  by  its  advo- 
cates, has  since  become  generally  recognized  as  not  a  "lull" 
but  a  complete  halt.  On  the  Continent,  as  we  have  seen 
in  our  summary  to-day,  municipalization  is  a  past  chapter 
in  the  history  of  economic  panaceas.  In  the  United  States, 
the  attempt  at  the  Philadelphia  Conference  of  Mayors  in 
November  to  inject  life  into  the  corpse  of  municipalism  as 
a  vote-catcher  fell  flat,  its  only  academic  supporter  present 


75 

among  the  politicians  being  Dr.  Howe,  with  his  reiterated 
infantile  guesswork  observations,  his  unbolted  statis- 
tics, and  his  blissful  ignoring  of  the  recorded  facts  that 
have  disproved  his  dreamy  theorizing. 

What  is  the  matter  with  municipalism?  The  reply  is  ^ 
that  it  brings  with  it  bureaucracy — inelasticity,  "over- 
staffing,"  siiiecurism,  the  evils  in  general  of  political  man- 
agement; and  the  menace  of  a  million  united  municipal 
employees ;  and  a  tyranny  over  the  million  by  the  superior 
officials;  and  a  confusion  in  city  finances,  with  constant 
difficulties  in  accurate  accounting ;  and  withal  the  blunder- 
ing, inertness,  costliness,  and  injustice  of  misapplied  gov- 
ernment. It  leads  the  citizens  of  a  community  to  lose  the 
distinction  between  "mine,  thine,  and  ours"  in  liberty  and 
property ;  it  teaches  its  employees  of  all  grades  to  look  for 
aid  to  legislation  rather  than  to  themselves;  it  points  to 
social  deterioration  through  its  imperfect  mechanism;  it 
carries  economic  waste  toward  a  maximum. 


76 


THE  FAILURE  OF  GOVERNMENT 
OWNERSHIP  OF  RAILROADS. 

F.  G.  R.  GORDON. 

For  a  dozen  years  or  more  many  socialist  magazines, 
newspapers,  books  and  pamphlets,  containing  articles  ad- 
vocating the  government  ownership  of  railroads,  have  been 
given  wide  circulation  throughout  this  country.  Many 
men  whom  we  delight  to  call  statesmen  have  attempted  to 
prove  that  government  ownership  of  the  great  transporta- 
tion systems  is  both  wise  and  just.  Most  of  the  articles 
and  speeches  are  made  up  largely  of  misstatement,  misrep- 
resentation and  ungrounded  assumption.  In  reply  to  such 
assertions  I  submit  actual,  not  fictitious,  data.  With  their 
aid,  I  shall  show  that  the  American  railroads  are  capital- 
ized per  mile  at  less  than  one-half  the  capitalization  of  the 
government-owned  railways  of  Europe;  that  the  privately 
owned  railroads  of  this  nation  give  tne  best  and  cheapest 
service  and  pay  the  highest  wages  in  the  world;  that  the 
,Vpeople  of  this  nation  save  more  than  $5,000,000  a  day,  in 
freight  transportation  alone,  compared  with  the  high  rates 
charged  by  the  State-owned  railways  of  Germany;  and  that 
freight  rates  in  this  country  are  without  exception  cheaper, 
in  most  cases  by  from  one-half  to  three-fourths,  than  the 
rates  on  the  socialist  railways  of  Europe.  ' 

While  the  facts  do  not  bear  out  the  general  socialistic 
estimate  of  the  railway  situation  one  cannot  find  fault  with 
the  onslaught  which  is  made  on  certain  railroads  and  the 
juggling  of  finances  by  those  who  controlled  them  years 
ago,  and  even  by  some  who  are  in  control  to-day.  Such 
scandalous  disclosures  as  we  have  had  in  the  last  three  or 
four  years  justify  any  onslaught  that  anybody  can  make. 
But  there  is  a  silver  lining  eve.n  to  this  cloud,  and  that  is 
that  in  the  last  five  years  the  Interstate  Commerce  Com- 
mission has  been  given  power  to  end  all  such  practices.  In 


I  i 

fact,  it  is  the  Interstate  Commerce  Commission  which  has 
exposed  the  iniquities  of  the  New  York,  New  Haven  and 
Hartford  Railroad  and  the  legislation  which  we  have  now 
secured  will  prevent  such  scandals  in  the  future.  But  the 
socialists  make  no  mention  of  this  great  advance  in  busi- 
ness standards  that  has  come  about  in  the  last  few  years. 
Let  us  examine  their  indictment  of  our  railroad  system 
and  their  proposition  for  government  operation.  The 
charges  usually  brought  against  the  railways  of  this  coun- 
try by-advocates  of  government  ownership  are  "over-capi- 
talization," the  "high  cost  of  service"  and  the  "appalling 
loss  of  life,"  Let  us  examine  them,  briefly, 

CAPITALIZATION. 

The  charge  of  over-capitalization  of  the  American  rail- 
roads falls  flat  when  we  compare  their  capitalization  with 
that  of  the  government  railways  of  Europe. 

Actual  Capitalization,  United  States  Railroads,  1912. 

248,888  miles  of  Operated  Line  (I.  C.  C.). 

Total  capital  stock  and  funded  debt $19,694,987,553 

Duplication  of  ownership 5,037,442,484 

Net  capitalization    $14,657,545,069 

Per  mile  of  line  owned  (238,300  miles) $61,506 

Per  mile  of  track  owned  (341,782  miles) 41,204 

The  $5,037,442,484,  the  amount  of  stocks  and  bonds 
which  the  larger  systems  own  in  smaller  lines,  represents 
a  duplication  of  stocks  and  bonds  to  that  extent.  The 
necessary  subtraction  had  been  apparently  overlooked. 

The  correctness  of  deducting  this  $5,037,442,484  is  dis- 
puted by  the  socialist  advocates.  Let  us  see.  This  $5,037,- 
442,484  represents  securities  issued  by  certain  railroads  to 
purchase  stock  and  bonds  in  other  roads.  If  the  New  York 
Central  Railed  issued  bonds  to  borrow  $2,000,000  for  the 
purpose  of  buying  $2,000,000  worth  of  stock  in  the  Erie 
Railroad,  it  has  added  $2,000,000  to  its  debt,  but  it  has 
$2,000,000  of  the  stock  of  the  Erie  Railroad,  and  dividends 


78 

OB  tki»  $2,000,000  are  now  paid  to  the  New  York  Central 
Bftilroad  instead  of  to  the  Erie  stockholders.  Dividends 
are  not  paid  on  $2,000,000  more  of  capitalization ;  there  has 
been  no  increase.  The  Interstate  Commerce  Commission 
Reports  for  1911  show  this  in  giving  the  amount  of  $168,- 
592,376,  included  in  "other  income"  as  representing  inter- 
corporate payments  of  dividends  and  interest — this  revenue 
being  from  the  ownership  or  operation  of  one  system  of 
roads  by  another. 

As  will  be  noted,  the  largest  part  of  the  "other  income" 
account  simply  represents  dividends  paid  out  of  income  to 
certain  companies  for  stocks  and  bonds  owned  in  other 
railroads.  Taking  two  farms  as  an  illustration,  the  prob- 
lem is  made  very  simple.  The  Smith  farm  and  the  Jones 
farm  are  each  capitalized  at  f  10,000.  The  Smith  owners 
wish  to  control  the  Jones  farm  in  order  to  grow  potatoes 
on  an  increased  scale,  but  the  Smiths  have  no  ready  capital. 
They,  therefore,  borrow  from  the  bank  $6,000,  issuing  a 
mortgage  (bond)  on  their  farm.  With  this  $6,000  they 
buy  control  of  the  Jones  farm.  They  thus  own  six-tenths 
of  the  capital  and  receive  six- tenths  of  the  dividends  earned 
from  the  Jones  farm,  and  out  of  this  six-tenths  dividends 
they  pay  interest  through  the  bank  for  the  money  borrowed 
to  buy  control  in  the  Jones  farm.  There  is  still  only  the 
net  capitalization  of  $20,000 ;  on  the  apparent  $26,000  of 
capital  stands  the  debt  of  $6,000  exchanged  for  six-tenths 
of  the  value  of  the  Jones  farm  capital.  Plainly,  the  Smith 
corporation  has  $16,000  invested  in  the  two  farms,  and  the 
Jones  corporation  only  $4,000. 

Four  States  have  made  valuation  of  the  railways  within 
their  borders,  through  official  commissions  appointed  for 
this  purpose.  Following  are  the  results : 

States                                                    Cost  of  Reproduction  Capitalization 

Washington    (1905)    $194,057,240  $161,582,000 

South  Dakota    (1908) 106,494,503  109,444,600 

Minnesota  (1907)   360,961,548  300,027,676 

Wisconsin  (1909)    296,803,322  225,000,000 

Total  , $958,316,613        $796,094,276 


79 


Now  look  at  the  capitalization  of  the  railway*  of  other 
countries : 

Capital  or 

Miles  Cost  of  Construction 

Year         Country  of  Line  Total  Per  Mile 

1911  United  Kingdom  ....  23,417  $6,447,969,398  $275,354 

1910  German   Empire    ....  36,740  4,163,615,519  113,326 

1908  Russian  Empire-  ....  41,888  3,378,839,810  80,902 

1909  France    25,017  3,593,660,000  143,648 

1910  Austria    14,038  1,654,207,119  117,837 

1910  Hungary 12,821          858,732,000         66,977 

1910-11  Italy   (State) 8,908       1,131,300,000       126,886 

1907  Spain  (State)    8,980  692,818,000  77,151 

1908  Portugal   1,465  162,385,280  110,830 

1909  Sweden   8,366  277,952,716  33,224 

1911  Norway 1,891  81,467,176  43,087 

1911  Denmark  (State)    . . .  1,215  70,277,640  57,841 

1.910  Belgium  (State)    ....  2,685  504,210,184  187,787 

1910  Netherlands    1,978          163,798,304         82,810 

1910  Switzerland    2,924  341,208,367  116,692 

1911  Roumania 2,153  186,670,372  86,702 

1909  Servia  (State)   350  31,440,000  89,830 

1909  Bulgaria  (State)   ....  1,048  60,113,551  57,456 

Total  Europe,  including 

Asiatic  Russia 195,884  $23,800,665,436     $121,503.87 

Other  countries : 

1912  Canada    26,727     $1,585,724,797       $59,330 

1909  British  India   32,099  1,448,700,000  45,135 

1910  Argentine  Republic  .  .  17,381  868,914,950  49,981 

1911  Japan  (State)    4,767  411,598,253  86,343 

1912  New    South   Walesf.  .  3,831  260,613,180  68,288 

1911  New  Zealand f   2,761  153,448,880  55,574 

1911  Queenslandf    3,929  132,982,560  33,820 

1911  Victoriaf    3,505  206,804,550  59,000 

From  1907  to  1912  the  State  railways  of  Denmark  in- 
creased their  capitalization  by  27.13  per  cent,  and  during 
the  same  time  increased  their  mileage  by  only  1.94  per  cent. 
During  these  same  years  the  capital  of  privately  owned 
railways  of  this  country  increased  by  13.44  per  cent,  and 
the  mileage  increased  by  9.32  per  cent.  Or  to  state  it  in 
another  way:  Our  private  railways  increased  their  capi- 


*  Includes  Asiatic  railways. 

f  New    South    Wales    railways   are    4    ft.    Sty    in.    gauge,    New   Zealand  and 
Queensland  3  ft.  6  in.,  and  Victoria  (all  but  12l"miles)   5  ft,  3  in. 


80 

talization  only  one-half  as  rapidly  as  the  socialistic  roads 
of  Denmark,  but  at  the  same  time  increased  their  mileage 
five  times  as  fast.  Some  socialists  in  an  evasive  and  hair- 
splitting argument  deny  that  government-owned  railways 
are  socialistic.  I  insist  that  they  are,  being  essentially 
owned,  controlled,  and  administered  by  government  author- 
ity. My  term  "socialistic"  is  scientifically  correct. 

In  1906  the  German  railways  were  capitalized  at 
$104,548  per  mile;  in  the  four  following  years  they  in- 
creased their  capitalization  by  almost  f  9,000  per  mile.  The 
Belgian  railways  were  capitalized  at  f  167,898  in  1903;  in 
seven  years  these  State  roads  increased  their  capitalization 
by  $20,000  per  mile.  Every  government  railway  in  Europe 
has  increased  its  capitalization  at  a  much  greater  rate  than 
the  railways  of  this  country.  The  over-capitalization  bogy 
of  the  socialists  and  government  ownership  advocates  is 
thus  relegated  to  the  region  of  plain  fabrications. 

The  growth  of  capital  outlay  per  mile  in  Germany, 
France  and  the  United  States  for  the  three  years,  inclusive, 
1907  to  1909,  shows  that  Germany  increased  4.8  per  cent., 
France  3.3,  and  the  United  States  only  1.6.  In  other  words, 
the  capitalization  of  the  State  railways  of  Germany  in- 
creased just  three  times  as  rapidly  as  the  private  roads  of 
America. 

AMERICA  HAS  THE  CHEAPEST  FREIGHT  SERVICE 
IN  THE  WORLD. 

What  are  the  facts  upon  which  the  socialists  base  their 
charge  as  to  the  high  cost  of  service  on  the  American  rail- 
ways? 

First,  it  is  a  fact  that  had  passenger  and  freight  rates 
been  the  same  in  1913  as  in  1880  our  transportation  bill 
would  have  been  more  than  four  billion  dollars  as  against 
less  than  three  billions — a  saving  of  more  than  a  billion 
dollars  per  year.  The  socialists  didn't  tell  us  about  this. 

Freight  rates  in  America  in  1880  were  1.232  cents  per 


81 

ton  per  mile;  in  1890  they  had  been  reduced  to  .941  cent; 
in  1900  to  .729  cent,  and  at  present  the  average  is  prac- 
tically .741  cent,  a  slight  increase  since  1900.  That  is,  in 
1880  the  rate  was  nearly  twice  as  great  as  in  1913.  In 
1890  passenger  rates  were  2.167  cents  a  mile ;  in  1900,  2.003 
cents;  in  1909,  1.928  cents,  and  at  present  they  are  about 
the  same.  These  are  the  facts  presented  by  the  Interstate 
Commerce  Commission.  Can  any  socialistic  railway  any- 
where show  similar  progressive  results?  Not  one. 

Our  railroads  are  transporting  beef  from  Chicago  to 
Boston,  a  distance  of  1,000  miles,  for  one-half  cent  a  pound ; 
eggs  from  the  Middle  West  to  New  England  for  two  cents 
a  dozen ;  a  pair  of  shoes  from  Boston  to  Chicago  for  two 
cents.  In  1896  a  bushel  of  wheat  sold  for  62  cents,  and 
that  62  cents  would  pay  for  transporting  a  barrel  of  flour 
1,240  miles  on  the  railroads.  In  1913  a  bushel  of  wheat 
sold  for  |1,  and  that  $1  would  pay  for  transporting  a  barrel 
of  flour  2,509  miles.  The  railroads  now  carry  a  pound  of 
ham  1,000  miles  for  one-third  of  a  cent.  The  average  price 
of  ham  is  eighteen  cents  a  pound.  The  railroads  carry  54 
pounds  of  ham  1,000  miles  for  18  cents.  They  carry  a  dozen 
oranges  from  Los  Angeles  to  New  York,  3,100  miles,  for 
five  cents.  The  freight  on  a  suit  of  clothes  made  in  New 
York  and  sold  in  Chicago  for  $15  is  less  than  seven  cents 
(6.8  cents). 

In  Australia  the  average  freight  rates  are  from  two  to 
five  times  as  high  as  in  America ;  in  Germany  freight  aver- 
ages 1.41  cents  per  ton  per  mile,  as  against  .741  cent  in  this 
country.  What  this  rate  means  to  the  American  people  can 
be  seen  when  we  figure  the  cost  of  our  freight  at  the  Ger- 
man rate.  Our  freight  bill  for  1912  was  $2,211,814,665. 
As  the  German  rate  is  80  per  cent  higher,  the  American 
people  would  have  lost  the  enormous  sum  of  $1,700,000,000 
if  we  had  been  compelled  to  pay  the  socialistic  rate  which 
the  German  people  paid. 

The  reductions  in  our  freight  rate  from  1892  to  1912 
amount  to  a  saving  of  $346,640,875  for  the  latter  year. 


82 


Twenty  years  ago  freight  rates  on  the  German  railways 
averaged  1.49  cents  per  ton  per  mile;  they  now  average  1.41 
cents,  a  reduction  in  twenty  years  that  is  just  one-half  the 
reduction  in  this  country. 

Many  men  are  alarmed  over  the  fact  that  the  railroads 
have  asked  permission  from  the  Interstate  Commerce  Com- 
mission to  increase  their  freight  rates  by  5  per  cent,  a  peti- 
tion which  has  been  granted  to  some  of  the  roads  applying 
for  the  increase.  Last  year  the  State  railways  of  Hungary 
increased  their  freight  rates  13  per  cent  per  zone.  The 
State  railway  of  Italy  increased  both  passenger  and  freight 
rates,  and  the  Danish  government  has  several  times  re- 
cently increased  freight  rates  on  its  railways  in  order  to 
save  them  from  bankruptcy. 

Let  us  see  what  the  German  people  lost  by  high  freight 
rates.  The  number  of  tons  of  freight  carried  one  mile  on 
the  German  railways  in  the  year  1910  was  32,124,223,390. 
The  State  railroad  reports  of  Germany  are  generally  de- 
layed about  fourteen  months,  as  against  only  three  months 
for  the  company  railroads  of  this  country.  If  the  German 
people  had  paid  only  the  American  freight  rates  of  .741  cent 
per  ton  mile,  their  freight  bill  for  1910  would  have  been 
1238,040,495.  But  they  paid  1.41  cents,  and  their  freight 
bill  was  $456,766,493,  an  excess  in  cost  of  $218,721,998. 
It  required  the  ingenuity  of  a  socialist  to  turn  a  difference 
in  our  favor  of  $218,721,998  into  a  statement  that  the  Ger- 
man rates  were  less  than  ours. 

It  has  been  asserted  that  in  Germany  great  quantities 
of  freight  go  via  canal  and  river  instead  of  by  rail.  Up  to 
1905  the  total  capital  expenditure  of  Prussia  on  its  canals 
and  canalized  and  other  rivers  amounted  to  $132,500,000, 
or  less  than  the  State  of  New  York  has  expended  upon  the 
Erie  Canal  alone.  The  improvements  on  the  Rhine  cost  up 
to  1905  over  $60,000  a  mile;  the  expenditure  for  canals  and 
canalized  rivers  had  been  over  $40,000  per  mile,  and  the 
average  for  river  improvements  over  $30,000  a  mile.  In 
1905  Prussia  alone  expended  more  than  $4,000,000  for 


83 

tka  maintenance  of  its  interior  waterways.  The  receipts 
for  that  year  were  $1,700,000.  -The  direct  loss  on  opera- 
tion was  §2,300,000,  and  on  interest,  at  4  per  cent,  $5,300,- 
000,  or  a  total  of  $7,600,000.  This  was  a  government  tax  on 
all  the  people  indirectly  in  order  to  provide  cheap  freight 
rates  on  the  canals  and  rivers.  Water  craft  pay  very  small 
rates  for  the  use  of  canals  and  nothing  at  all  for  the  use  of 
the  rivers. 

It  has  been  stated  that  the  canals  and  rivers  of  Ger- 
many are  vastly  more  important  in  the  transportation  of 
freight  than  are  the  railroads.  Here  is  an  official  table  of 
freight  carried  that  serves  to  show  the  monumental  per- 
versions of  which  socialist  writers  are  capable: 

Rail  Tons,  1885  Tons.  1905 

Import    8,000,000  27,000,000 

Export    13,000,000  33,000,000 

Local 87,000,000  254,000,000 

Transit   2,000,000  5,000,000 


Total  110,000,000  319,000,000 

Water  Tons,  1885  Tons.  1905 

Import    6,500,000  20,000,000 

Export    3,500,000  11,000,000 

Local 7,000,000  21,000,000 


Total  17,000,000  52,000,000 

The  water-borne  traffic  is  thus  seen  to  be  insignificant. 
The  most  important  canal  in  Germany,  the  Kaiser  Wilhelm, 
had  a  tonnage  in  1911  of  7,580,000.  Our  most  important 
canal,  the  Sault  Ste.  Marie,  had  a  tonnage  in  1910  of 
49,856,123,  and  in  1913  of  over  72,000,000.  The  freight 
traffic  of  our  great  lakes  and  rivers  and  canals  exceeds  all 
the  water-borne  traffic  of  the  German  rivers  and  canals  by 
150  per  cent.  All  in  all,  besides  enjoying  railway  freight 
rates  80  per  cent  cheaper  than  the  German,  our  people 
save  $250,000,000  annually  by  the  still  cheaper  rates  for 
our  water-borne  commerce  on  the  great  lakes  alone,  which 
are  the  cheapest  freight  rates  in  all  the  world,  and  yet  pay 
the  highest  wages  in  the  world  for  like  employment.  And 


84 

this  business  is  under  private  ownership.     Don't  forget 
that,  Mr.  Socialist. 

The  freight  rates  on  the  socialistic  railways  of  Denmark 
average  three  times  as  high  as  the  rates  in  this  country. 
Taking  the  last  report  and  figuring  it  on  the  Danish  rate, 
we  find  that  our  freight  bill  for  the  year  ending  June  30, 
1913,  would  have  been  over  $6,600,000,000  in  place  of 
the  12,211,814,665  if  we  had  been  forced  to  pay  that  social- 
istic rate!  Yet  the  red-flag  coterie  howl  for  socialistic 
railways  to  save  us  from  going  straight  to  ruin !  The 
freight  rates  on  the  Belgian  State  roads  average  50  per 
cent  higher  than  in  this  country,  and  in  France  they  are 
75  per  cent  higher.  Look  at  this  table  of  freight  rates  on 
State-owned  railroads: 

Rates  per  Rates  per 

Ton — Cents  Ton — Cents 

Austria,  1910 1.45  Norway,  1910 1.68 

France,  1909 1.39  Denmark    2.16 

Russia,  1908 95  Holland,  1910 1.32  ' 

Hungary,  1910   1.31   Switzerland,  1910 2.91 

Sweden,  1908 2.23  Germany,  1910 1.41 

New  South  Wales 1.78 

These  rates  average  more  than  twice  as  high  as  in  this 
country,  yet  wages  in  all  those  same  countries  average  less 
than  half  the  wages  here. 

In  spite  of  the  fact  that  the  cost  of  American  railroad 
labor  has  increased  25  to  50  per  cent  in  the  last  twenty- 
five  years,  and  railroad  supplies  have  advanced  consider- 
ably, both  freight  and  passenger  rates  have  been  reduced. 

Here  is  a  striking  illustration  figured  from  the  official 
reports  of  the  railways  of  Germany  and  the  United  States 
for  the  year  1910.  One  day's  average  wages  of  a  German 
railway  employee  would  pay  for  moving  a  ton  of  freight  on 
the  State-owned  railroads  of  Germany  a  distance  of  83 
miles.  One  clay's  average  wages  of  an  American  railroad 
employee  would  pay  for  moving  one  ton  of  freight  a  dis- 
tance of  260  miles  in  Germany. 

Passenger  rates  on  the  American  railroads  were  re- 
duced from  2.126  cents  per  mile  per  passenger  in  1892  to 


85 

1.992  cents  in  1913,  a  saving  over  the  former  year  on  the 
number  carried  in  1913  of  $42,024,446.  The  total  compar- 
ative saving  on  both  freight  and  passenger  traffic  was 
$388,665,321.  Or,  put  in  another  way,  freight  rates  were 
reduced  17%  per  cent  and  passenger  rates  6  per  cent 
During  this  twenty -year  period  the  average  wages  of  rail- 
way employees  were  increased  from  $570  to  $734.  The  total 
wages  paid  in  1892  were  $468,598,170,  and  in  1912  $1,268,- 
977,272,  an  increase  of  170.8  per  cent.  The  employees  have 
increased  in  number  from  821,415  in  1892  to  1,728,603  in 
1912,  or  110.4  per  cent.  During  this  twenty-year  period 
railroad  taxes  increased  from  $209  to  $485  per  mile,  and 
they  are  now  $500  per  mile. 

PASSENGER  RAILWAY  RATES  IN  EUROPE. 

Class  1.  Class  2.       Class  3. 

Ownership.  Cents  per  Mile.         Cents.  Cents. 

Germany  (Government)    2.73  1.75  1.16 

Belgium    (Government)    2.91  1.98  1.17 

France    (Government)     3.16  2.35  1.53 

France  (Private)    3.48  2.34  1.53 

Italy    (Government)    3.60  2.92  1.62 

Up  to  1907  passenger  rates  in  Germany  were  as  follows : 

Ordinary  Trains.  Fast  Trains. 

Cents  per  Mile.  Cents  per  Mile. 

First  class    3.06  3.45 

Second  class 2.30  2.55 

Third  class 1.53  1.79 

Fourth  class 77 

These  rates  then  allowed  for  baggage  and  a  return  ticket 
at  20  to  30  per  cent  reduction,  etc.  Since  the  new  schedule 
went  into  effect,  in  1907,  nothing  but  hand  baggage  is  al- 
lowed the  passenger.  Return  tickets  and  excursion  and 
convention  rates  were  abolished.  While  the  new  schedule 
calls  for  slightly  less  per  ticket  than  the  old,  the  cost  of  the 
two  single  tickets  for  a  return  trip  amounts  to  considera- 
bly more  than  the  return  ticket  rates  of  the  old  system. 
Under  the  new  schedule  an  imperial  tax  is  levied  upon  first, 
second  and  third  class  fares.  Tickets  costing  60  pfennigs 
to  20  marks  (15  cents  to  $5)  are  taxed  five  cents  first  class 
and  two  and  one-half  cents  second  class.  Tickets  costing 


86 


more  than  50  marks  are  taxed  $2  first  class  and  $1  second 
class.    However,  only  four  per  cent  ride  first  class. 

Under  the  new  schedule  the  rates  for  ordinary  train 
service  are:  First  class  2.68  cents  per  mile,  second  class 
1.72  and  third  class  1.15.  Express  train  rates  are  con- 
siderably higher.  From  Berlin  to  Hamburg  and  return, 
356  miles,  the  first  class  fare  on  express  trains  is  $11.04. 
From  New  York  to  Washington  and  return,  450  miles, 
first  class  is  $10.  Besides,  on  the  American  railroads,  be- 
tween our  larger  cities,  there  are  more  express  trains  in 
twenty-four  hours  than  in  Continental  countries,  where  the 
fast  trains  frequently  have  no  third  class  cars.  In  France 
the  first  class  passenger  rates  are  3.48  cents  per  mile,  for 
second  class  1.92  cents  and  for  third  1.73  cents.  This 
includes  the  State  tax  of  12  per  cent  on  railroad  tickets. 
The  sixty-six  pounds  of  baggage  carried  free  make  the  rates 
about  equal  to  those  of  Germany.  First  class  and  second 
class  in  Europe  are  much  the  same  as  chair  cars  here,  and 
the  rates  figure  as  high  as  our  chair  car  service.  The  cheap 
passenger  rates  of  Europe  are  for  the  third  class  service, 
that  is  to  say  for  accommodations  which  would  not  be  tol- 
erated in  this  country.  The  third  class  passenger  traffic  on 
all  State-owned  railways  in  Europe  amounts  to  more  than 
90  per  cent  of  the  total  travel.  In  Denmark  only  one  pas- 
senger in  500  rides  first  class. 

Differences  in  service  count  much  in  comparing  the 
passenger  travel  of  America  and  Europe.  Baggage  is  an 
important  item.  In  Germany  and  Italy,  for  instance,  hand 
baggage  only  is  carried  free.  Heavy  baggage  calls  for  extra 
payment  per  weight  and  distance.  In  Switzerland  the  hand 
baggage  allowed  free  is  only  up  to  22  pounds.  There  is  not 
a  socialistic  railway  in  Europe  that  carries  baggage  free 
to  the  degree  w-hich  it  is  done  on  the  American  railways. 
France  allows  66  pounds.  Indeed,  the  baggage  problem  in 
Europe  is  an  abomination,  as  every  experienced  traveler 
will  declare,  as  well  as  being  expensive.  One  heavy  trunk 
on  some  roads  amounts  to  a  third  of  the  regular  fare. 


.    87 

RAILWAY  OWNERSHIP. 

Government  ownership  advocates  would  have  the  people 
believe  that  a  few  millionaires  own  the  American  railways. 
But  the  one  big  fact  in  connection  with  railway  ownership 
in  this  country  is  that  there  has  been  a  remarkable  distri- 
bution of  railway  stocks  and  bonds  during  the  past  twenty 
years. 

The  following  table  shows  how  the  number  of  share- 
holders in  some  of  the  principal  roads  has  increased  since 
the  Interstate  Commerce  Commission  reported  that  there 
were  327,785  shareholders  in  1,182  roads  in  1904: 

Shareholders,-. 
Name   of   Company.  1904.  1912. 

Pennsylvania    44,175  74,002 

Atchison,  Topeka  &  Santa  Fe 17,823  31,738 

New  York  Central  &  Hudson  Eiver 11,781  22,247 

New  York,  New  Haven  &  Hartford 10,842  21,948 

Union  Pacific    14,256  21,600 

Great  Northern   383  17,841 

Southern  Pacific   2,424  14,387 

Northern  Pacific   368  13,987 

Chicago,  Milwaukee  &  St.  Paul 5,832  11,819 

Baltimore   &    Ohio 7,132  11,414 

Illinois  Central   9,123  9,987 

Erie 4,309  7,847 

Chicago  &  Northwestern .  4,109  8,564 

Boston  &  Maine 7,402  8,105 

Norfolk  &  Western 2,911  5,323 

Denver  &  Rio  Grande 2,910  4,928 

Missouri  Pacific 1,861  4,382 

Chesapeake  &  Ohio 1,478  4,138 

Louisville  &  Nashville 1,672  3,318 


Total    149,791  297,575 

Increase  per  cent 98.7 

Since  1912  the  number  of  owners  has  largely  increased. 
In  addition  to  this,  20  per  cent  of  the  savings  bank 
deposits  of  the  six  states  of  New  York,  New  Jersey,  New 
Hampshire,  Massachusetts,  Connecticut  and  Maine  are  in- 
vested in  railway  securities.  Mr.  H.  T.  Newconib  esti- 
mates that  the  ownership  of  the  American  railroads,  di- 
rectly and  indirectly,  is  represented  by  six  million  of  our 


88 

population.  From  this  the  number  of  owners  of  stocks 
and  bonds  in  all  the  railways  of  the  United  States  would 
to-day  be  over  800,000. 

ACCIDENTS. 

Muckrakers  in  general  fill  the  air  with  cries  of  horror 
over  the  number  of  accidents  on  American  railways.  But 
against  them  is  to  be  quoted  what  the  Block  Signal  and 
Train  Control  Board  says  about  safety :  "Nowhere  in  the 
world  have  appliances  for  safeguarding  railway  transpor- 
tation been  so  highly  developed  as  in  this  country." 

In  1892  the  number  of  passengers  killed  in  America  was 
equal  to  28  for  each  billion  miles  of  passenger  travel;  in 
1912  this  has  been  reduced  to  8.06;  that  is  to  say,  in  twenty 
years  fatal  accidents  to  passengers  have  been  reduced  by 
nearly  70  per  cent* 

The  following  table  of  statistics  for  23  years  of  fatali- 
ties charged  to  American  railways  shows  that  what  is 
needed  more  than  anything  else  is  a  trespass  law  that  can 
be  enforced : 

Killed.         Per  Cent. 

Trespassers 103,566  53.8 

Employees  through  their  own  fault  or  mis- 
chance    49,497  25.7 

Other  persons  through  their  fault  or  mischance  18,328  9.5 

Employees  in  accidents  to  trains 13,630  7.1 

Passengers  through  their  own  fault  or  mis- 
chance    4,219  2.2 

Passengers  in  accidents  to  trains 3,302  1.7 


Total  for  23  years 192,542  100.0 

In  accidents  to  trains 16,932  8.8 

Through  own  fault  or  mischance 175,610  91.2 

The  following  table,  giving  the  units  for  Europe  and 
this  country,  shows  that  while  our  passenger  traffic  is  much 
less  than  that  of  Europe,  our  freight  traffic  vastly  exceeds 


*  In  a  circular  issued  January  1,  1915,  one  of  the  most  important  railroad 
systems  in  the  United  States  makes  the  statement  that  during  the  year  1914 
not  a  single  passenger  out  of  the  188,411,876  carried  on  all  of  the  26,198  miles 
of  track  of  the  entire  system  was  killed  in  a  train  accident. 


89 

that  of  all  Europe,  and  that  most  train  accidents  and 
wrecks  in  this  country  are  due  to  freight  traffic. 

All  of  Europe,  United  States, 

1910  1912 

Miles  of  line 206,987  248,888 

Passengers  carried  one  mile 73,555,578,571       32,820,623,000 

Freight  tons  carried  one  mile. .   117,360,167,100     261,416,643,000 

It  goes  without  saying  that  the  mortality  on  our  rail- 
ways will  always  be  too  high  just  so  long  as  there  is  a  single 
passenger  or  employee  killed.  The  way  the  socialists  and 
near-socialists  print  statistics  of  the  mortality  on  our  rail- 
ways is  to  divide  the  number  of  passengers  carried  by  the 
number  killed  and  compare  this  with  the  same  data  for 
Europe.  This  is  seen  to  be  unfair  when  it  is  considered  that 
the  average  passenger  in  this  country  is  carried  a  distance 
of  33  miles,  against  only  20  in  France,  8  in  Great  Britain, 
14  in  Germany  and  15  in  Belgium. 

The  only  true  and  fair  way  to  compare  the  railways  of 
this  country  with  those  of  Europe  is  to  take  the  passenger 
miles  travelled.  That  means  the  number  of  passengers 
carried  one  mile.  For  instance,  the  number  of  passengers 
carried  on  the  railways  of  this  country  in  1912  was  in 
round  numbers  one  billion,  and  as  they  rode  an  average 
distance  of  33  miles  it  would  make  33  billion  miles,  or  33 
billion  passengers  carried  one  mile.  The  Interstate  Com- 
merce Commission  reports  that  the  number  of  passengers 
killed  in  1912  was  270,  which  would  be  an  average  of  just 
about  8  for  each  billion  passenger  miles  travelled.*  The 
latest  available  statistics  for  Europe  as  a  whole  are  for  the 
year  1910.  The  passenger  miles  travelled  in  Europe  for 
that  year  were  73,555,578,571  and  the  number  of  passengers 
killed  554,  the  ratio  being  seven  and  a  half  passengers 
killed  for  each  one  billion  passenger  miles  travelled.  Thus 
we  see  that  the  ratio  is  fairly  even,  but  there  is,  of  course, 


*  For  the  same  year  the  Commission  reports  that  13  persons  traveling  as 
passengers  on  freight  trains  were  killed,  and  also  35  persons  who  are  customarily 
carried  on  trains  under  special  arrangements,  such  as  postal  clerks  and  express 
messengers,  employees  on  Pullman  cars,  newsboys,  live  stock  tenders  and  men  In 
charge  of  freight.  As  none  of  these  persons  figure  In  the  passenger  mileage 
reported,  they  are  excluded  from  the  computation  of  the  ratio  between  the  number 
of  passengers  carried  one  mile  and  the  number  killed  in  train  accidents. 


90 

a  difference  between  the  different  countries  in  Europe 
which  is  worth  looking  into  when  we  consider  the  fact  that 
the  half-baked  socialists  favoring  government  ownership 
are  continually  telling  us  how  much  safer  the  government 
railways  are  than  those  under  private  ownership.  The  fol- 
lowing table  shows  a  mighty  important  fact: 

Passenger  Journeys,  Killed  in  Train 
1909  One  Mile  Accidents 

Great  Britain   (private) 1,717,850,260  1 

France  (State  and  private) 491,936,960  8 

Germany  (State)    469,978,000  25 

Belgium   (State)    193,059,662  11 

The  following  year  in  France  the  number  killed  rose 
to  71,  of  which  66  were  on  the  State-owned  railways,  and  as 
the  State  railways  number  only  about  5,600  miles  the  mor- 
tality on  those  government  railways  was  for  the  year  1910 
the  highest  in  the  world,  private  or  public.  In  1908  the 
4,283  miles  of  socialistic  railways  in  Belgium  killed  48  pas- 
sengers. 

Concerning  fatalities  the  London  Railway  Gazette,  in 
its  issue  of  July  11,  1913,  said:  "The  worst  record  in 
Europe  is  that  of  the  French  State  railways.  In  proportion 
to  the  number  of  passengers  carried  one  mile  they  killed 
almost  four  times  as  many  passengers  as  the  railways  of 
any  other  leading  country  of  Europe,  and  three  times  as 
many  as  the  railways  of  Canada  or  the  United  States.  Nor 
was  their  record  for  the  year  for  which  figures  are  given 
exceptional.  The  big  railway  accidents  which  have  oc- 
curred in  France  for  the  last  five  years  have  been  on  the 
State  systems,  three  on  the  old  State  system,  and  three  on 
the  Western." 

DEFICITS  AND  FAILURES. 

The  Prussian-Hesse  railroads  are  the  only  State  roads 
in  Germany  that  pay.  For  all  the  others  there  is  an  annual 
deficit. 

The  Italian  State  railways  are  bankrupt  to-day.  The 
annual  loss  on  the  8,908  miles  of  socialistic  railways,  with 


91 

-A 

interest  charges  and  taxes,  is  over  $31,000,000.  Those 
roads  cost  $1,131,300,000,  or  $126,886  per  mile.  Taking  the 
official  reports  for  the  year  1909,  we  find  that  the  total 
revenue  was  $97,652,000.  The  total  expense  for  operation 
was  $79,850,083,  leaving  a  balance  of  $17,807,917.  The 
interest  charge  for  that  year,  at  3  per  cent,  was  $33,939,000. 
Adding  to  this  the  net  returns  which  the  government 
would  have  received  from  taxes  had  the  railways  been  in 
private  hands,  we  have  a  total  net  loss  from  one  year  of 
socialistic  operation  of  $31,571,083.  This  is  another  of 
those  delightful  "successes"  which  the  socialists  enthusi- 
astically rejoice  over.  If  the  railways  of  the  United  States 
were  socialized  and  had  been  run  with  the  same  "success" 
as  the  Italian  railways,  our  net  loss  last  year  would  have 
been  over  $900,000,000.  The  main  trouble  in  Italy,  as  well 
as  elsewhere,  is  that  of  a  bureaucracy. 

For  the  Swiss  railways  the  reports  for  the  year  1910 
show  receipts  of  $43,000,000  and  expenses  for  operation  of 
$27,000,000,  in  round  numbers,  a  net  profit  on  operation 
of  $16,000,000.  But  before  there  could  be  any  real  profits, 
interest  on  capital  must  be  paid,  and  the  losses  from  taxes 
accounted  for.  As  these  Swiss  roads  cost  $341,000,000, 
interest  at  4  per  cent  would  eat  up  nearly  all  the  profit. 
And,  based  upon  the  tax  rate  in  this  country,  those  roads 
in  private  hands  would  have  paid  over  $1,500,000  annually 
in  taxes. 

The  Russian  railways  comprise  41,888  miles.  Of  these 
the  government  owns  and  operates  29,100  miles.  In  the 
year  1908  there  was  a  deficit  on  all  of  $57,998,278.  (See 
consular  report.)  The  deficits  are  growing  larger  each 
year,  and  the  Russian  press  is  now  discussing  the  question 
of  turning  wholly  to  private  ownership.  During  the  seven 
years  1905-1911  the  loss  on  the  government  lines  has  ag- 
gregated approximately  $250,000,000.  The  10,787  miles 
of  private  line  lost  during  the  same  seven  years  only 
$600,000.  The  wages  of  the  Russian  railway  employees 
average  about  50  cents  a  day.  The  government  roads  are 


92 

cursed  with  red  tapeism,  as  are  all  government  enterprises 
everywhere,  and  as  a  result  the  Russian  empire  is  hampered 
in  its  development  through  its  existing  State  socialism. 

Socialists  brag  of  the  fact  that  State-owned  railways 
have  never  gone  back  to  private  ownership.  There  is  agita- 
tion right  now  in  France,  Austria,  Russia  and  Argentina  to 
sell  the  State  railways. 

The  French  government  owns  and  operates  somewhat 
over  five  thousand  miles  of  railways.  It  has  made  anything 
but  a  success  of  the  transportation  service.  For  many 
years  it  has  owned  the  old  State  railway  of  1,864  miles. 
This  road  cost,  up  to  January,  1910,  the  sum  of  $183,- 
400,000.  The  latest  printed  report,  that  of  1909,  shows 
that  the  receipts  for  that  year  were  $13,051,000,  while  the 
expenses  for  operation  amounted  to  $10,514,340,  leaving 
an  apparent  profit  on  operation  of  $2,536,160.  But  at  only 
3  per  cent  the  interest  cost  to  the  government  would  be 
$5,502,000.  The  taxes,  on  the  basis  the  railroads  of  this 
country  pay,  would  amount  to  nearly  a  million  dollars  an- 
nually, leaving  a  net  yearly  loss  of  nearly  $4,000,000  on  this 
one  system. 

The  most  glaring  example  of  State  inefficiency  in  the 
management  of  a  great  railway  system  is  found  in  that  of 
the  Western  Railway  of  France.  This  company  was  owned 
and  operated  as  a  private  corporation  up  to  January,  1909, 
when  it  became  a  government  railway  system.  The  road 
has  been  so  poorly  managed  since  that  public  meetings 
have  been  held  at  which  indignant  orators  have  made  bitter 
attacks  on  the  government.  Wrecks  have  been  frequent, 
with  appalling  loss  of  life.  Under  private  management  the 
road  gave  fair  service  and  made  an  annual  profit  for  its 
owners.  The  first  year  of  public  ownership  the  net  deficit 
was  $7,750,000.  The  deficit  for  1910  was  $11,700,000,  and 
for  1911  the  loss  was  $14,000,000.  The  estimated  deficits 
for  1912  and  1913  are  $16,100,000  and  $18,000,000  re- 
spectively. (Leroy-Beaulieu,  Paris  Temps.) 

Under  private  ownership  the  annual  receipts  of  this 


93 

road  ranged  from  $13,000,000  to  $16,000,000;  since  the 
government  took  over  the  management  they  have  dropped 
to  an  average  of  $5,900,000.  The  proportion  of  working 
expenses  under  private  operation  never  went  above  55  per 
cent.  Under  State  management  they  rose  to  87  per  cent 
and  there  were  added  to  the  staff  5,280  officials  and  em- 
ployees. "Such  a  condition,"  says  Le  Temps,  "is  a  crying 
scandal."  The  annual  report  of  this  government  white  ele- 
phant is  regularly  delayed  for  thirteen  months.  "No  mat- 
ter what  the  State  takes  up,"  says  Le  Temps,  "the  man- 
agement is  characterized  by  disgraceful  waste,  if  not  by 
pillage." 

If  socialists  want  a  fine  example  of  the  folly  of  social- 
istic ownership  and  operation  of  a  railway  system,  they 
can  find  it  in  Canada,  for  there  they  can  examine  the  com- 
parative merits  of  both  public  and  private  ownership,  under 
the  same  laws,  the  same  wages  and  practically  the  same 
service. 

Leaving  out  the  Canadian  Northern,  which  is  an  un- 
completed road,  we  have  for  consideration  three  great  sys- 
tems, the  Grand  Trunk,  the  Canadian  Pacific  and  the  In- 
tercolonial, the  latter  owned  and  operated  by  the  Canadian 
government.  Both  the  Grand  Trunk  and  the  Canadian 
Pacific  pay  annual  dividends.  The  former  has  usually  de- 
clared 5  to  7  per  cent,  the  latter  has  yielded  dividends 
up  to  12  per  cent. 

The  Intercolonial  Railway  is  known  far  and  wide  over 
Canada  as  "Canada's  white  elephant."  This  government 
railway  embraces  1,449  miles.  It  stretches  from  Montreal 
eastward  through  the  Maritime  Provinces  for  a  distance  of 
more  than  a  thousand  miles.  It  taps  the  rich  iron  and 
coal  mines  of  Nova  Scotia  and  has  a  rail  monopoly  of  that 
transportation.  It  ought  to  be  the  best  paying  railway 
system  in  Canada,  but  it  is  the  worst. 

The  government  has  sunk  over  $83,000,000  in  this  rail- 
way. Its  gross  earnings  in  1909  were  $8,602,286,  and  its 
working  expenses  were  $9,052,522,  leaving  a  deficit  of 


94 

$449,536.  In  1912,  the  best  year  the  road  has  had,  the 
operating  expenses  were  $10,593,785,  showing  a  surplus  of 
$2,750.  But  the  interest  charges  on  the  cost  of  this  "white 
elephant"  amount,  at  4  per  cent,  to  $3,520,279  a  year,  and 
the  loss  in  taxes  to  $700,000  annually.  Thus  we  see  that  in 
its  best  year  this  socialistic  railway  lost,  net,  more  than 
$4,000,000.  That  is  what  socialists  call  a  success.  Truly, 
it  is  a  "socialistic  success." 

A  writer  in  the  Toronto  Mail  and  Express  stated  in 
1907  that  the  Intercolonial  Railway  had  lost  an  average 
of  nearly  $4,000,000  a  year  for  the  preceding  five  years. 
The  writer  has  travelled  over  the  Intercolonial  all  the  way 
to  Sydney,  B.  C.,  and  also  over  the  Canadian  Pacific  Rail- 
way and  the  Grand  Trunk.  In  reply  to  the  question  as 
to  why  this  government  railway  failed  to  pay,  one  old 
farmer  said:  "Well,  you  see,  the  boys  that  run  this  'white 
elephant'  think  more  of  getting  the  votes  on  election  day 
than  they  do  of  getting  the  trains  in  on  time."  And  that's 
just  the  trouble.  The  road  is  in  politics  up  to  its  neck. 
The  road  is  politically  operated.  It  costs  $7,500  per  mile 
per  year  to  operate  this  socialistic  railroad,  as  against 
only  $5,000  for  the  Grand  Trunk,  and  even  less  for  the 
Canadian  Pacific.  In  other  words,  experience  proves  again 
that  bureaucratic  management  of  industrial  enterprises 
always  means  waste,  extravagance,  inefficiency  and  polit- 
ical bossism. 

Socialists  themselves  are  today  modifying  their  stories 
of  the  wonderful  success  of  State  ownership  in  Australia 
and  New  Zealand. 

Former  Congressman  Victor  L.  Berger  some  months 
ago  published  in  his  Social  Democratic  Herald  (sus- 
pended) a  timely  article  on  public  ownership  in  New 
Zealand.  He  said :  "Now,  the  fact  is  that  the  New  Zea- 
landers  had  public  ownership  of  public  utilities  for  over 
twenty  years  before  they  tried  social  reforms,  and  during 
the  time  of  their  greatest  misery.  So  public  ownership 
of  public  utilities  did  not  make  them  prosperous."  And 


95 


he  said,  further :  "Just  now  there  is  a  boom — about  in  the 
same  sense  that  there  is  'prosperity'  in  America,  but  only 
a  few  years  ago  the  reports  of  the  labor  secretary  of  the 
colony  of  New  Zealand  were  as  gloomy  reading  as  those  of 
any  other  country." 

Henry  D.  Lloyd,  a  socialist  author,  said  in  his  book 
about  New  Zealand:  "That  even  now — that  is,  in  boom 
times — the  streets  of  the  larger  cities  of  New  Zealand 
swarm  with  young  men  and  young  women,  who,  unfortu- 
nately, are  not  unemployed,  though  their  hands  are  idle." 
Mr.  E.  E.  Clark,  member  of  the  Australian  Parliament, 
says:  "There  must  be  an  abolition  of  excessive  State  So- 
cialism, or  it  will  drag  the  country  to  a  condition  which 
will  shortly  render  it  unfit  to  live  in."  Let  us  see  what  Mr. 
Lloyd  had  to  say  about  Australian  railways.  On  page  63  of 
"Newest  England,"  he  says:  "Equitable  rates  and  any- 
thing like  a  scientific  and  intelligent  commercial  policy  j 
have  manifestly  been  subordinated  to  the  exigencies  of  the  ^ 
treasury.  There  has  been  an  unreasoning  and  almost  uni-  \ 
form  insistence  upon  high  and  vexatious  charges."  And,  on 
page  49 :  "None  of  the  Australian  governments  make  both 
ends  meet  in  their  railroads.  None  of  them  are  able  to  pay 
out  of  the  receipts  of  the  railroads  the  full  interest  on 
the  money  borrowed  to  build  them.  The  taxpayers  have  \ 
to  go  down  in  their  pockets  every  year  to  make  the  deficit  j 
good."  Page  60 :  "The  New  Zealand  railways  are  in  some 
respects  almost  primitive.  They  can  be  shown  to  be  in- 
ferior to  the  roads  of  Europe  and  America  in  speed  and 
comfort."  Page  78:  "Even  under  public  ownership  the 
democracy  has  not  yet  found  out  how  to  make  a  demo- 
cratic tariff."  Mr.  Lloyd  then  shows  how  unequal  the  rates 
are,  and  how  the  country  districts  of  New  Zealand,  though 
the  less  able,  are  compelled  to  pay  three-fourths  of  the 
passenger  receipts  and  nearly  all  the  freight-receipts. 

Liberty  and  Progress,  a  Melbourne  publication,  pub- 
lished tables  of  statistics  in  the  early  months  of  1908, 
showing  that  the  Australian  States  had  lost  about  $164,- 


96 

000,000  before  they  began  to  cover  expenses,  in  the  opera- 
tion of  the  State  railways.  This  means  a  continuous 
annual  expense  of  some  $6,000,000  for  interest  charges  on 
the  loss  of  $164,000,000. 

Mr.  A.  W.  Pease,  editor  of  the  Pastoralist  Review, 
shows  that  not  only  are  the  Australian  railways  woefully 
inefficient,  but  also  that  other  countries  which  have  pro- 
ceeded on  the  plan  of  allowing  owners  of  capital  to  bear 
their  own  risks  and  losses  in  the  matter  of  railway  build- 
ing, have  shot  away  ahead  of  Australia  in  their  competition 
for  the  trade  of  the  world.  He  shows  the  condition  of 
Argentina  in  comparison  with  Australia.  In  the  former  a 
network  of  railways  has  served  to  develop  the  interior  with 
six  trunk  lines,  while  Australia  can  boast  of  only  one.  In 
1908  Argentina  opened  up  1,300  miles  of  railway  and  Aus- 
tralia only  468  miles.  In  the  same  year  Argentina  had 
3,900  miles  in  course  of  construction  and  6,000  miles  under 
survey;  the  total  under  construction  in  Australia  was  only 
685  miles. 

According  to  the  London  Times,  June  28,  1912,  the 
capitalization  of  the  Australian  railways  for  road  and 
equipment  was  $46,217  per  mile.  This  is  very  high  when 
we  consider  that  there  are  few  bridges,  a  nearly  level 
country  and  a  labor  cost  per  day  of  30  per  cent  less  than 
in  this  country.  A  considerable  amount  of  the  mileage  is 
narrow  gauge,  an  important  fact  which  public  ownership 
advocates  conveniently  forget  to  mention.  The  interest 
upon  the  cost  of  the  Australian  railways,  together  with  the 
loss  of  the  interest  upon  the  $164,000,000  of  losses  on  oper- 
ation (before  the  operating  expenses  were  less  than  the 
revenue),  amount  to  an  annual  charge  of  more  than  $40,- 
000,000.  To  this  must  be  added  the  loss  in  taxes  that  these 
lines  would  have  paid  to  the  State  if  they  had  been  under 
private  ownership,  which,  based  upon  the  rate  paid  by  the 
American  railways,  would  amount  to  more  than  $7,500,000 
a  year. 

The  Washington  Star,  investigating  the  railways  of 


97 

New  Zealand,  finds  that  the  freight  rates  are  from  two 
to  three  times  as  high  as  they  are  in  this  country.  It  also 
says  that  the  alleged  cheap  passenger  rates  are  not  enjoyed 
by  the  general  public,  but  by  special  classes  only,  such  as 
those  who  can  afford  the  time  to  take  long  vacations,  and 
that  the  special  class  tickets  are  issued  at  a  loss.  Thus  we 
see  that  one  class  is  carried  at  a  loss  which  has  to  be  met 
by  overcharging  all  the  people.  The  Star  also  found  that 
the  speed  and  general  comfort  of  the  passengers  are  far 
inferior  to  those  in  this  country;  that  government  owner- 
ship in  New  Zealand  has  almost  completely  put  an  end  to 
activity  in  the  construction  of  new  roads  and  has  arrested 
the  development  of  the  country ;  and  further,  that,  had  the 
New  Zealand  system  prevailed  in  this  country  the  phenom- 
enal growth  of  such  States  as  Oklahoma  would  have  been 
unknown.  On  the  question  of  profits  and  taxes  paid  by  the 
privately  owned  railroads  of  this  country,  the  Star  shows 
that  for  twenty  years  the  taxes  alone  would  offset  the 
normal  net  earnings  of  the  New  Zealand  railways;  and  that 
railroad  patronage  is  used  in  New  Zealand  for  political  I 
purposes  by  the  officials,  and  certain  sections  of  the  coun- 
try are  punished  or  rewarded,  as  the  case  may  be,  by  good 
or  poor  railway  service,  according  to  the  way  they  vote  at t 
the  general  elections.  The  New  Zealand  railroads  are 
operated  at  a  loss,  says  the  Star,  which  the  taxpayers  are 
obliged  to  make  good  for  the  benefit  of  those  who  live  along 
the  line  of  the  railroad,  or  who  profit  directly  by  it.  The 
evils  which  are  complained  of  in  little  New  Zealand  would 
be  multiplied  a  thousand  fold  in  this  great  country  were 
we  to  socialize  the  railways. 

LABOR  UNDER  GOVERNMENT  OWNERSHIP. 

What  has  the  workingman,  the  railroad  employee,  to 
look  for  under  this  government  ownership  scheme  which  we 
are  asked  to  believe  is  such  a  wonderful  blessing  to  every- 
body in  the  countries  that  have  tried  it?  The  American 
workingman  who  once  learns  the  facts  will  be  apt  to  con- 


98 

elude  that  it  is  a  blessing  in  disguise  and  so  much  in  dis- 
guise that  the  blessing  cannot  be  found  at  all. 

In  1900  the  1,017,653  American  railroad  employees  re- 
ceived 38.82  per  cent  of  the  total  gross  revenue  of  the 
railroads;  in  1912  the  1,750,000  employees  received  44.20 
per  cent.  The  railroad  shopman  who  received  |2  in 
1900  now  receives  $2.62.  In  thirty  years  the  trackman's 
wages  have  increased  70  per  cent,  and  the  trainman's  59 
per  cent.  Labor  welfare  work,  which  was  almost  unknown 
thirty  years  ago,  is  now  a  part  of  the  administration  of 
practically  every  great  railway  system  in  America.  The 
railroad  Y.  M.  C.  A.,  partly  supported  by  the  railroads,  is 
found  in  every  railroad  center.  The  railroad  brotherhood 
officials  meet  the  railroad  company  officials  on  common 
ground  for  the  mutual  settlement  of  all  kinds  of  disputes, 
thus  eliminating  in  large  degree  the  possibility  of  strikes. 
In  contrast,  last  year,  when  the  government  of  South 
Africa  sought  to  curtail  expenses  by  the  discharge  of  only 
seventy  shopmen,  a  government  committee  having  reported 
that  the  railroad  shops  were  overstaffed  by  1,750  men,  the 
attempt  caused  a  strike  of  35,000  railway  employees,  which 
paralyzed  the  transportation  system  of  the  country,  and 
the  end  of  that  industrial  contest  cannot  be  seen,  as  the 
government  was  defeated  in  the  March  (1914)  elections. 

As  already  shown,  wages  on  the  various  State-owned 
railroads  in  Europe  are  from  one-half  to  one-third  those  in 
this  country.  Strikes  have  taken  place  on  the  State  rail- 
ways in  Prance,  Austria,  South  Africa  and  Australia,  and 
threats  of  strikes  have  been  made  elsewhere,  but  the  em- 
ployees have  found  that  under  government  ownership  they 
may  be  practically  compelled  to  work  against  their  will, 
and  that  to  refuse  to  work  amounts  to  treason  against  the 
State.  Also,  under  civil  service  regulation,  which  would 
control  the  situation,  the  railway  brotherhoods  could  tear 
up  their  charters  and  forget  that  they  ever  had  organiza- 
tions. Do  these  socialist  dreamers  imagine  that  industrial 


99 

peace  could  be  preserved  in  this  country  under  a  schedule 
which,  if  logically  carried  out,  might  at  any  time  subject 
nearly  one  million  and  three-quarters  of  American  work- 
ingmen  tojnvoluntary  seryjtude? 

The  conclusion  to  be  drawn  from  the  foregoing  facts 
is  the  utter  failure  of  government  ownership  everywhere 
and  in  all  respects  compared  with  private  management. 
Socialistic  management  has  always  and  ever  proved  extrav- 
agant, inefficient,  non-progressive  and  a  constant  source  of 
favoritism  and  waste. 

The  nationalization  of  any  great  railway  system  will 
transfer  a  great  industry  from  the  domain  of  business  to 
that  of  politics. 


100 


CITY  TRANSIT  SYSTEMS:  MUNICIPAL 

VS.  COMPANY  OWNERSHIP 

AND  OPERATION. 

J.  W.  SULLIVAN. 

Comparison  between  American  and  British  urban  tran- 
sit systems  brings  into  strong  light  the  effects  of  two 
divergent  national  economic  policies.  In  Great  Britain, 
tramway  ownership  and  operation  is  mainly  municipal ;  in 
America,  street-car  transit  is  carried  on  almost  invariably 
by  companies  which  work  under  franchises  prescribing  a 
qualified  ownership  and  a  more  or  less  regulated  operation. 

In  Great  Britain,  nearly  all  the  more  profitable  among 
the  tramway  undertakings  have  been  assumed  in  the  last 
twenty  years  by  the  various  municipalities,  while  the  non- 
paying  or  poorly-paying  have  been  left  by  the  reforming 
municipalists  in  the  hands  of  companies,  to  struggle  in  ir- 
remediably disadvantageous  circumstances  for  the  small 
dividends  possible  to  them  or  for  bare  escape  from  positive 
bankruptcy. 

1.  In  1914,  America  has  40,070  miles  of  street-car 
track,  all  operated*by  companies,  except  a  few  minor  lines, 
the  principal  one  being  in  San  Francisco,  and  the  others 
in  Monroe,  Louisiana  (12,000  inhabitants),  in  St.  Louis 
(the  "water  works"  line)  ;  in  Yazoo  City,  Mississippi;  Bis- 
marck, North  Dakota,  and  Seattle,  Washington,  the  losses 
on  the  last  named  thus  far  f6,000  a  month.     The  United 
Kingdom  has  2,637  miles  of  tramway  "route  length,"  of 
whiclfcl,777  miles  are  operated  by  municipalities  and  860 
by  companies.     The  total  "track  length"  is  4,303  miles, 
approximately  one-tenth  the  mileage  in  the  United  States. 

2.  The  American  city  street-car  fare  for  a  ride  of  any 
length  going  one  way  on  a  system  is  either  five  cents  or 
six  or  more  tickets  for  25  cents.    British  fares  are  graded, 
according  to  distances  travelled,  in  "zones"  or  "fare  sec- 
tions." 


3.  The  total  mileage  of  street-ca?  tracks  iii  a  'eftj?  indi- 
cates, first,  the  degree  of  convenience  of  service  to  the  pub- 
lic, especially  in  outlying  districts,  and,  secondly,  an  in- 
creasing cost  of  operation  with  the  number  of  miles.    Con- 
trasts on  these  points:     Liverpool,  with  746,421    (1911) 
inhabitants,  has  119  miles  of  track;  Boston,  with  670,585 
(1910)  470  miles  (surface  lines  alone).     Leicester,  with 
228,000  inhabitants,  has  37  miles;  Louisville,  Ky.,  with 
215,000,  125  miles.    In  the  sixteen  British  and  Irish  cities 
having  from  221,000  to  650,000  inhabitants,  only  two- 
Dublin,  with  a  company  service,  and  Glasgow — have  over 
100  miles  of  track;  of  the  twenty  American  cities  having 
from  172,000  to  613,000  inhabitants,  only  three  have  less 
than  100  miles,  five  have  more  than  200,  and  six  others 
more  than  150.    Two  British  cities  with  more  than  100,000 
inhabitants  have  no  street  railways,  nor  have  seven  cities 
with  between  50,000  and  100,000,  nor  39  with  between 
25,000  and  50,000.    In  the  United  States,  all  cities  having 
25,000  inhabitants  or  more  have  street  railways.    So  have 
many  with  10,000.    In  America,  it  is  thus  seen,  street-car 
service  as  a  public  utility  is  incomparably  more  available 
than  in  Great  Britain.   It  is  more  common  throughout  the 
country  and  more  convenient  to  all  parts  of  the  community 
in  which  it  is  established.  The  street-car  trackage  of  Amer- 
ica equals  in  mileage  the  entire  trackage — steam  and  elec- 
tric— of  Great  Britain. 

British  tramway  enterprises,  with  their  relatively  short 
mileage  and  their  density  of  traffic  in  large  centres  of  popu- 
lation, are  manifestly  in  a  position  peculiarly  favorable  to 
profitable  operation  by  their  management  through  low 
fares  for  short  rides. 

4.  In  Liverpool,  the  tracks  in  several  streets  are  for 
use  only  when  the  more  crowded  streets  are  closed  to  traf- 
fic;   in    Glasgow,    citizens'    organizations    compelled   the 
tramway  department  to  lay  tracks  in  certain  streets  where 
the  business  would  pay,  though  not  so  well  as  in  the  more 
crowded  neighborhoods.     Contrasts:  The  population  per 
mile  of  track  runs :  Glasgow,  5,154 ;  Philadelphia,  2,350 ; — 
Sheffield,  6,577;  Cleveland,  2,280 ;— Edinburgh,  7,720;  Cin- 


102 

ciimati,  1,S90.  Theye  figures  signify  that  direct  service  in 
American  cities  reaches  both  urban  and  suburban  areas 
which  in  British  cities  remain  without  convenient  service. 

5.  At  the  end  of  a  month,  or  a  year,  the  average  dweller 
in  or  near  an  American  city  may  find  that,  in  his  necessary 
movement  beyond  walking  distances,  he  has  used  as  a 
public  conveyance,  except  in  long  steam  railroad  rides,  only 
the  street-cars.    The  street  transit  system  of  his  city  has 
carried  him  everywhere  within  it,  and  very  likely  to  many 
points  miles  beyond  its  limits,  and  in  many  localities  at 
all  hours  of  the  day  and  night.     On  the  other  hand,  the 
dweller  in  a  British  city  finds  that,  since  the  tram  lines  in 
numerous  cases  do  not  run  to  the  quarter  he  would  go, 
nor  at  all  hours  of  the  night,  he  must  frequently  take  a 
cab,  or  other  costly  means,  to  reach  a  desired  destination 
within  a  certain  necessary  time.  In  London,  as  public  places 
of  amusement  and  saloons  must  close  at  12:30  at  night, 
the  service  of  busses,  trams  and  underground  railways 
from  the  centre  closes  down  at  one  o'clock,  with  the  excep- 
tion that  where  there  is  sufficient  demand  for  all-night 
services  on  trams  it  is  alleged  to  be  provided.     But  in 
London,  for  the  reasons  given,  the  resident  may  usually 
incur  an  outlay  for  transit  in  a  year  amounting  to  more 
than  he  would  in  New  York,  and  this  is  certainly  the  case 
with  the  person  travelling  long  distances  between  home 
and  work. 

6.  For  any  distance  exceeding  five  miles,  the  American 
five-cent  rate  is  cheaper  than  the  fare  paid  anywhere  in 
Great   Britain    (with   one  exception — Glasgow  gives  5.8 
miles  for  five  cents).    Glasgow's  longest  ride,  14.8  miles, 
costs  the  passenger  14  cents.    The  "Motor-Bus  Guide"  for 
London  gives  the  fares  from  one  terminus  to  the  other  for 
the  one  hundred  and  sixty-five  'bus  routes  which  today  are 
taking  away  passengers  from  the  County  Councils  tram- 
way systems.     All  of  these  routes  except  five  short  ones 
(less  than  three  miles)  have  a  full-trip  fare  of  more  than 
five  cents;  twenty-seven  (four  and  a  half  to  seven  and  a 
half  miles)   have  between  six  and  nine  cents;  eighty-six 
(eight  to  thirteen  miles)    have  between  ten  and  fifteen 


103  «A 

cents;  thirty-seven  (eleven  to  twenty-two  miles)  have  be- 
tween sixteen  and  twenty-four  cents.  For  five  cents,  New 
York  gives  a  maximum  ride  of  17  miles,  Philadelphia  26, 
St.  Louis  22,  Baltimore  17.  In  other  words,  for  all  "zones" 
of  street-car  travel  exceeding  five  miles  America  has  by  far 
the  cheaper  service. 

This  fact  indisputable,  search  for  British  superiority 
over  American  street  transit  systems  narrows  itself,  as  to 
rates,  standard  of  service,  and  general  convenience,  to  the 
distances  of  less  than  five  miles.  Following  are  particu- 
lars on  this  point: 

7.  The  American  method  of  selling  a  "slip"  of  tickets 
at  a  reduced  rate  is  not  in  practice  in  Great  Britain. 
Therefore,  in  the  American  cities  giving  this  commutation, 
the  "zone"  of  rates  lower  than  the  British  is  further  cut 
down  to  four  or  even  three  miles.    Washington,  Detroit, 
Cleveland,  are  types  of  the  cities  having  special  features 
of  reduction  in  price  by  this  method.    In  other  words,  in 
these  cities,  for  distances  of  more  than  three  and  a  half 
miles,  ticket  fares  are  usually  lower  than  tram-car  fares 
in  British  cities.     To  this  rule  there  is  one  exception — 
British  workmen's  fares  in  "rush"  hours. 

8.  Few  British  transit  systems  (but  one  that  is  im- 
portant) issue  free  transfer  tickets.     Usually,  with  each 
change  of  cars  a  full  fare  is  paid.    In  America,  more  than 
20  per  cent  of  all  the  passengers  carried  in  a  year  take 
free  transfers   (census  report)  ;  in  the  larger  cities,  the 
percentage  rises  much  higher,  on  some  lines  even  to  40 
per  cent   (state  reports).     The  passengers  in  either  per- 
centage pay  one  fare  where  in  British  cities  they  ordinarily 
pay  two  or  even  three.    New  York  has  a  double  transfer 
system,  equivalent,  for  example,  to  three  fares  in  Glasgow. 

9.  In  not  a  few  British  cities,  all  fares  are  graded  from 
a  central,  or  starting,  point.    The  passenger  taking  a  con- 
tinuous ride  which  laps  over  this  point  must,  on  passing 
it,  pay  a  second  fare,  even  if  carried  previously  but  a  quar- 
ter of  a  mile.    In  Leicester,  for  example,  the  central  point 
is  the  "Clock  Tower,"  in  the  heart  of  the  business  district. 
All  rides  inclusive  of  this  point  take  double  fares.     The 


>%;•  104 

passenger  on  transferring  to  a  cross-line  pays  again. 
Hence,  in  the  municipal  reports  (for  Leicester,  as  an  ex- 
ample) a  single  one-way  passenger  may  be  counted  as 
three,  thus  reducing  his  apparent  outlay.  The  statistical 
tabulated  average  fare  per  ride  is  not  the  actual  average 
fare  per  trip. 

10.  The  graded  fares  of  British  cities  are  calculated 
as  from  one  "fare  stage"  to  another.  A  passenger  getting 
on  a  car  between  two  fare-stage  termini  and  off  between 
the  next  two,  even  if  he  rides  but  half  a  mile  or  less,  pays 
two  fares.  Economical  passengers  walk  to  the  nearest 
fare-stage  post.  Thus  they  may  gain  a  penny,  but  they 
lose  in  time  and  fatigue  and  in  bad  weather  risk  their 
health  and  damage  their  clothes. 

The  facts  of  the  last  four  paragraphs  serve  to  set  aside 
two  common  misapprehensions  regarding  car-fare  compari- 
sons for  the  two  countries.  From  one-fifth  to  two-fifths  of 
all  American  flat-rate  fares  really  pay  two  fares,  obtained 
through  the  transfer  with  a  five-cent  piece  or  a  four-cent 
or  three-cent  ticket.  In  Great  Britain,  on  the  contrary,  a 
single  trip  may  cost  a  passenger  several  fares.  The  Ameri- 
can uniform  five-cent  or  ticket  rate  helps,  on  the  postage 
stamp  principle,  to  maintain  the  "lean"  part  of  the  service 
— the  long  rides  and  the  all-night  runs.  The  British  sys- 
tem cuts  out  the  "lean"  service  or  reduces  it  to  a  minimum. 
The  American  passenger  giving  five  cents  for  a  short  ride 
"pays  for  what  he  gets"  in  a  sense  more  strictly  true  than 
the  British  passenger  who  pays  two  cents  for  his  single- 
section  ride.  The  American  pays  for  and  gets  his  pro  rata 
service  from  a  system  maintained  in  readiness  to  carry 
him  in  all  cases  long  distances  and  in  many  cases  during 
twenty-four  hours  a  day,  all  the  year  round.  In  the  course 
of  a  given  period  reaching  into  months,  his  necessary  tran- 
sit expenditure  sums  up  to  a  lower  amount  than  it  would 
with  graded  fares.  This  is  true  of  a  regular  day  and  night 
rider,  even  within  a  five-mile  zone,  and,  as  shown  above, 
(Paragraph  6),  invariably  beyond  a  five-mile  zone.  In 
Great  Britain,  very  poor  people  generally  walk,  or  stay  at 
home,  or  live  near  their  work,  amusements,  or  associations. 


105 

They  are  pent  up  in  their  own  quarters  through  long-dis- 
tance fares  being  higher  than  they  can  afford. 

11.  Three  cents  as  a  street-car  fare — a  penny  and  a 
half — takes  a  larger  proportion  from  the  average  British 
bread-winner's  earnings  than  five  cents  from  the  Ameri- 
can's.   In  the  skilled  trades  in  the  United  States,  money 
wages  are  from  two  to  three  times  as  high  as  they  are  in 
Great  Britain.     In  the  unskilled,  the  American  workman 
certainly  earns  five  dollars  where  the  British  workman 
earns  three.     As  to  wages  on  street-car  systems,  W.  D. 
Mahon,    President  of   the   American    street   railway   em- 
ployees' association,  after  visiting  Great  Britain  a  few 
months  ago,  reported:    "The  highest  wage  paid  any  body 
of  tramway  workers  in  Europe  is  safely  100  per  cent  less 
than  the  rate  paid  in  this  country  in  the  same  occupation, 
and  we  found  this  to  be  the  fact  both  on  private  and 
municipal  systems." 

12.  In  other  words:    American  breadwinners  by  the 
million,  literally,  are  daily  carried  for  five  cents  (or,  on 
tickets  by  the  quarter's  worth,  for  four  or  three  cents,  or 
on  transfers  for  two  and  five-tenths  cents),  between  city 
and  distant  suburb,  up  to  ten  miles  in  many  places  and 
up  to  twenty  or  more  in  the  larger  cities.     The  British 
breadwinner,  by  walking  and  riding,  making  much  slower 
time  per  mile,  is  carried  for  a  general  average  of  1.0T9d. 
(2.19  cents),  usually  between  a  congested  factory  district 
and  a  tenement  neighborhood,  for  much  less  than  five 
miles.     It  has  been  said  of  Glasgow,  with  its  low  short- 
distance  fares :    "The  tram  system  'churns  up'  the  popula- 
tion within  the  slums."    The  twenty  millions  of  American 
people  living  in  the  forty-seven  cities  in  the  United  States 
having  a  population  of  more  than  100,000  inhabitants  can 
get  a  street-car  ride  of  from  five  to  twenty  miles,  or  in 
cases  further,  for  five  cents.    In  no  case  are  similar  areas 
open  at  such  fares  to  the  British  population. 

13.  The  customary  speed  of  a  British  tram-car  is  about 
seven  miles  an  hour;  that  of  an  American  street-car  from 
eight  to  twelve.     (Exact  data  lacking.) 

14.  The  open  double-deck  car  is  serviceable  in  Great 


106 


Britain  by  reason  of  the  mildness  of  the  climate,  the  long 
stops  permitted  for  taking  on  and  discharging  passengers, 
and  the  slow  running  rate,  which  lessens  the  dangers  of 
the  car  with  an  upper  deck  overturning. 

15.  The  average  wait  between  cars — the  "headway" — 
in  British  cities  on  lines  owned  by  companies  is  6.3  min- 
utes, while  on  municipal  lines  it  is  8.1,  though  the  munici- 
pal lines  are  in  the  most  thickly  populated  cities.     The 
American  prefers  a  quick  service  to  a  vexatious  loss  of 
time  to  save  a  cent  or  two.     ( In  the  large  cities,  of  course, 
the  service  is  the  more  frequent. ) 

16.  The  British  rule  of  restricting  the  number  of  pas- 
sengers taking  up  standing  room  in  a  car  has  disadvan- 
tages. Americans  have  learned  to  prefer  the  inconveniences 
of  standing  inside  the  first  car  coming  along  to  standing 
still  at  a  street  corner  in  uncertainty,  perhaps  in  trying 
weather,  waiting  for  a  car  that  may  be  actually  partly 
empty  but  officially  full. 

A  factor  in  these  comparisons:    The  total  amount  of 
time  lost  by  the  British  public  in  waiting  for  service. 

17.  The  British  car  after  dark  has  commonly  less 
than  half  the  lights  of  an  American  car.     Opposing  an 
improvement  in  lighting  a  Manchester  Municipal  Tram- 
way Committeeman  has  publicly  said:   "A  tram-car  is  no 
place  to  read  a  paper." 

18.  The  British  passenger  on  paying  his  fare  is  given 
by  the  conductor  a  punched  ticket,  to  be  produced  on 
demand  by  an  inspector.     If  a  passenger  loses  his  ticket, 
his  fare  must  be  repaid.     If  the  conductor  loses  an  un- 
punched  ticket,  he  is  liable  for  the  fare  it  represented. 
Printing,  sorting,  packing  and  checking  fare  tickets  are 
not  among  the  costs  and  cares  of  American  street-car 
administration.  The  cash-register  pay-as-you-enter  method 
is  not  in  practice  on  English  systems. 

19.  An   all-night   service,    common   in   the   principal 
American  cities,  is  the  case  in  Great  Britain  only  on  a 
few  lines.    Consequently  even  in  London  (which  has  all- 
night  service  only  on  the  principal  routes)  much  of  the 


107 

travel  from  the  central  districts  outward  after  1  A.  M., 
as  already  said,  must  be  by  cab,  at  night  rates.  In  the 
smaller  American  cities  generally,  the  street  cars  are  in 
continuous  service  eighteen  hours  a  day,  in  British  cities 
on  the  average  fifteen.  The  traveller  who  reaches  any  one 
of  the  larger  American  cities  by  steam  railway  late  at 
night  can  take  a  street  car  from  the  station  to  his  hotel  or 
home.  Women  frequently  thus  travel  alone.  In  Great 
Britain,  arrival  late  at  night  usually  adds  seriously  to 
the  cost  of  a  journey,  especially  as  there  is  no  general 
baggage  express  service. 

20.  Through  uniformity  of  track  gauge  the  numerous 
American  interurban  systems,  whose  networks  cover  the 
thickly  settled  states,  can  connect  without  change  of  cars. 
British  interurban  systems,  of  which  there  are  but  few, 
have  gauges  at  variance  by  several  inches.     Leeds,  Brad- 
ford, Huddersfield  and  Halifax,  whose  adjacent  systems 
all  lie  within  a  radius  of  twenty  miles,  have  four  different 
gauges,  with,  of  course,  dislocated  services.    England  and 
Wales  have  476  miles  of  3.6  gauge,  174  miles  of  4,  and 
1,095  miles  of  4.8.     Scotland  has  four  gauges,   Ireland 
five. 

21.  Long  distance  electric  tram  car  travel  is  unknown 
in  Great  Britain ;  there  are  no  systems  of  "trolley"  lines 
covering  hundreds  of  miles,  as  in  America.    American  pas- 
sengers and  shippers  of  freight  annually  save  enormous 
total  sums  through  the  big  new  suburban  electric  sys- 
tems.   The  consequent  encouragement  to  travel  and  trade 
is  a  social  gain.    One  may  go  by  electric  road  from  New 
York  to  Philadelphia,  nearly  100  miles,  for  less  than  a  cent 
a  mile.    Indianapolis  is  a  centre  whence  electric  trains  or 
single  cars  traverse  a  thousand  miles  of  track,  the  speed 
reaching  forty  miles  an  hour. 

22.  In  general,  American  street  railway  companies 
have  sought  a  unity  of  development  and  administration 
within  any  possible  given  area  of  service,  however  large, 
and  the  policy  of  American  municipalities  and  states  is 
usually  to-day  encouragement  in  each  case  to  a  single 
exclusive  agency.    Alleged  competition  has  given  way  to 


108 

legally  recognized  combination  with  a  constantly  improv- 
ing regulation.  English  cities,  on  the  contrary,  have  per- 
mitted the  growth  of  diverse  organizations  of  tramway 
transit  within  a  single  practicable  administrative  area. 
London,  with  but  275  miles  of  surface  tramway  track, 
against  Greater  New  York's  1,250,  has  three  separate  area 
systems,  with  only  one  connecting  line  between  them  run- 
ning through  the  heart  of  the  metropolitan  district.  But  it 
has  scores  of  motor  'bus  systems  on  restricted  routes  and 
thousands  of  horse  and  motor  cabs,  together  with  numerous 
sub-stations  of  the  steam  and  underground  electric  rail- 
way, the  fares  of  the  last  named  (for  all  distances  above 
five  miles)  considerably  higher  than  the  New  York  subway 
or  elevated  fare  of  five  cents.  London's  local  passenger 
traffic  is  "hopeless  entanglement  and  obstruction."  Sir 
J.  Wolfe  Barry  has  estimated  the  loss  of  time  at  four  con- 
gested points  crossed  by  'bus  lines — Cheapside,  Strand, 
Piccadilly  Circus  and  'Oxford  Street  at  Tottenham  Court 
Koad — at  more  than  ten  million  dollars  a  year.  Not  only 
London's  wageworkers  but  the  salaried  classes  more  fre- 
quently dwell  within  the  dense  population  centres,  and 
walk  to  their  work,  than  is  the  case  in  New  York. 

23.  Where  two  persons  ride  in  New  York  on  public 
conveyances  one  rides  in  London. 

24.  Municipal  ownership  in  Great  Britain  in  its  early 
years  had  several  signal  advantages  in  making  a  successful 
showing  as  compared  with  British  company-owned  as  well 
as  American  street  car  lines. 

(a)  The  American  companies  were  first  to  adopt  elec- 
tric power.  Their  expenses  of  experiment  and  develop- 
ment obviously  were  enormous.  Each  stage  in  the  ad- 
vance of  the  industry,  as  superior  designs  in  equipment 
were  progressively  invented  and  adopted,  was  marked  by 
the  successive  discarding  of  many  million  dollars'  worth 
of  motors  and  generators  as  well  as  of  line  supplies.  When 
in  1896  the  Glasgow  Municipal  Commission  on  Tramways, 
after  visiting  America,  decided  in  favor  of  abandoning 
horse  power  and  adopting  electricity,  its  report  relative 
to  American  electric  tramway  machinery  and  line  equip- 


109 

ment  read:  "They  have  all  been  by  experience  so  much 
improved  that  now  they  are  practically  standardized,  and 
they  can  undoubtedly  be  bought  at  very  much  less  money 
than  at  any  former  time."  Then,  and  then  only,  profiting 
by  the  costly  pioneer  work  of  American  companies,  the 
municipalities  of  Great  Britain  began  to  electrify  their 
tramways.  Hard-earned  results  of  American  private  en- 
terprise— the  demonstrated  cheapenings  in  methods  and 
mechanism — here  became  a  forced  gift  to  the  world. 

(b)  The  book-keeping  of  British  municipalities  for  a 
period  immediately  after  the  municipalization  of  transit 
permitted  reports  of  profits  in  operation  where  there  had 
actually  been  deficits.    This  was  usually  effected  through 
transferring  to  the  books  for  general  municipal  accounting 
various  charges  that  properly  belonged  to  the  tramway 
undertakings.     Illustration:     The  London  County  Coun- 
cils' tramway  undertakings  were  represented  in  1906  by 
its  chief  committeeman  as  having  put  aside  out  of  profits, 
between  1897  and  1904,  for  the  relief  of  local  taxation,  the 
sum  of  $1,500,000.    But  when  in  1907  this  committeeman's 
party  lost  the  majority  in  the  Council,  the  President  of 
the  Institute  of  Chartered  Accountants  and  other  auditors 
of  the  first  rank  in  Great  Britain,  after  examining  the 
accounts  of  the  undertakings,  reported  that  this  $1,500,000 
ought  to  have  been  applied  to  making  up  a  loss  exceeding 
$5,000,000  unrecorded  in  the  Council's  method  of  tramway 
book-keeping.    Similarly,    in    the    early    years,    various 
municipalities   persistently    omitted   or   understated   the 
item  of  depreciation  to  make  out  an  apparent  or  an  exag- 
gerated profit. 

(c)  The  municipalized  undertakings  of  Great  Britain 
are  incontestably  the  "cream"  of  the  industry.     In  large 
part  they  came  to  the  municipalities  by  inheritance.    The 
plants,  operated  by  companies  under  a  franchise,  the  term 
usually  twenty-one  years,  were  on  the  expiration  of  the 
allotted  time  taken  over  by  the  municipalities  at  what  came 
to  be  called  a  "scrap-iron"  valuation.     Some  of  the  com- 
pany undertakings,  to-day  remaining  unmunicipalized  for 
the  reason  that  they  can  hardly  be  made  pay,  have  been 


110 

left  by  the  municipalities  to  their  own  struggles,  and  their 
inevitable  inferiorities  are  shown  up  by  nmnicipalists  to 
indicate  the  alleged  superiorities  of  municipal  ownership. 
A  French  writer,  A.  De  Bussy,  in  "La  Municipalisation 
des  Tramways,"  says  (page  191)  :  "The  oldest  systems 
are  the  most  productive.  It  is  just  these  that  the  munici- 
palities have  bought  and  among  them  have  kept  the  opera- 
tion of  the  best  paying.  Therefore  they  have  now  the  good 
enterprises.  Private  enterprise  has  the  rest." 

(d)  Municipal     tramway    undertakings    pay     light 
taxes.    In  the  State  of  New  York  the  street  railways  (sur- 
face, elevated,  and  underground)  pay  $4,000,000  in  taxes 
annually;  in  the  United  States  they  pay  more  than  $35,* 
000,000.     The   municipal    tramway    undertakings   of   the 
whole  United  Kingdom,  during  the  year  ending  March, 
1912,  paid  £451,719  ($2,250,000)  in  rates  and  taxes. 

(e)  Company  lines  pay  for  their  own  police  work. 
Another  charge  not  always  entered  into  the  books  against 
a  municipal  undertaking  is  its  pro  rata  share  in  the  cost 
of  the  municipal  administration — a  due  charge,  since  the 
legal,  auditing,  mayoralty,  police  and  certain  other  depart- 
ments directly  assist  in  its  operation,  as  is  not  the  case  in 
company  management. 

(f)  The  tramway  undertakings  of  twenty-seven  mu- 
nicipalities in  Great  Britain  show  deficits  (1910-11)  when 
sinking  fund  payments  and  reserves  for  depreciation  are 
considered. 

25.  The  relations  between  the  British  municipality 
and  its  tramway  employees  has  brought  out  peculiar  labor 
problems. 

(a)  Just  prior  to  elections,  municipal  tramway  em- 
ployees have  formulated  demands  for  higher  wages,  etc., 
with  pressure  on  candidates  and  support  to  the  complying 
political  party. 

(b)  The  Municipal  Employees'  Association  in  Great 
Britain,  in  the  days  of  its  success,  had  among  its  members, 
as  the  largest  proportion,  tramway  hands.    Whether  these 
men  were  paid  and  otherwise  treated  on  the  terms  justified 


Ill 

by  the  labor  market  (modified  by  the  British  living  stand- 
ard), or  in  consequence  of  their  political  power,  is  a  ques- 
tion pregnant  with  disturbing  possibilities  in  view  of  a 
growing  bureaucracy. 

(c)  The  unskilled  class  of  municipal  tramway  work- 
men, selected  under  exacting  civil  service  rules,  are  natu- 
rally paid  somewhat  better  than  British  laborers  in  gen- 
eral, taken  as  the  lot  runs,  from  good  to  the  worst.    Be- 
sides, the  Municipal  Employees'  Association  advertises  that 
it  stands  ready  to  intervene  when  any  municipal  employee 
is  discharged  or  otherwise  possibly  has  a  grievance.    But 
the  skilled  municipal  workmen  are  paid  either  only  slightly 
higher  rates  than  company  employees  of  a  like  class  or 
the  same  trade  union  rates.    The  work  of  the  municipal 
employees  is  in  the  larger  cities,  where  their  duties  are 
more  trying  and  the  cost  of  living  higher  than  for  the 
company  employees  of  the  smaller  undertakings. 

(d)  The  general  increase  in  the  wages  of  employees 
by  British  municipalities  after  electrifying  their   tram- 
ways— a  point  emphasized  by  municipal  ownership  advo- 
cates— has  been  less  by  a  large  percentage  than  the  in- 
crease in  wages  on  American  lines,  all  operated  by  com- 
panies, since  their  electrification.     (See  "Wage  History  of 
the  Amalgamated  Association  of  Street  and  Electric  Rail- 
way Employees  of  America";  November,  1914;  Detroit, 
Mich.)     The  American  scale  of  money  wages,  grade  for 
grade,  for  street-car  men,  running  double  that  of  Great 
Britain,  this  difference  in  wages  alone  would  go  far  toward 
showing  the  differences  in  the  financial  problems  of  the 
undertakings  in  the  two  countries,  especially  as  related  to 
fares. 

(.e)  The  menace  of  political  action  as  a  body  by  the 
Municipal  Employees'  Association  in  Great  Britain  may 
have  something  to  do  with  the  fact  that  in  Liverpool  and 
Glasgow,  notably,  the  municipal  tramway  managers  for 
years  prevented  the  men  from  joining  trade  unions.  The 
British  Trade  Union  Congress  six  years  ago  excluded  the 
composite  industrial,  political,  and  civil  service  Municipal 
Employees'  Association  from  representation,  as  destruct- 


112 

ive  of  the  regular  unions  of  members  composed  of  a  single 
occupation. 

(f)  Municipalization  does  not  provide  immunity  from 
strikes.    In  1912  the  tramway  employees  of  Stockport  and 
Cardiff,  and  in  1911  the  tramway  employees  of  Leeds,  Old- 
ham  and  Glasgow  went  on  strike,  and  those  of  Leeds  again 
in  1913  in  a  general  municipal  strike.    The  Board  of  Trade 
reports  for  1913  strikes  by  municipal  employees,  involving 
17,000  in  all,  in  Barrow-in-Furuess,  Bradford,  Leeds,  Liv- 
erpool, Fraserburgh,  Oldham,  Stockport,  Sunderland,  and 
Swansea. 

(g)  Municipalization  insures  no  fixity  of  tenure  for 
employees.    In  Glasgow,  in  the  first  seven  electricity  years 
of  the  municipalized  tramway  system,  the  discharges  and 
resignations  were  at  a  rate  equal  to  a  change  of  the  entire 
working  force  in  every  four  years.     The  annual  average 
of  dismissals  and  resignations  in  the  traffic  force  alone, 
averaging  2,300  men,  was  516.    The  discipline  is  of  mili- 
tary severity.    Admissions  to  the  force  are  made  only  upon 
rigid  requirements  as  to  age,  habits,  and  prescribed  qual- 
ifications, all  exceeding  British  company  standards.     (Au- 
thority on  these  points,  a  Glasgow  tramway  committeeman 
having  access  to  the  official  books.) 

2(>.  Since  the  era  of  municipalization  the  tramway 
systems  of  Great  Britain  have  developed  but  little  in 
mileage. 

27.  In  the  last  seven  years  no  additional  tramway 
systems  have  been  municipalized  in  Great  Britain   (one 
exception,  Coventry,  1912).    Municipalization  of  all  kinds 
has  come  to  a  halt,  the  movement  discredited  in  money- 
lending  circles  (to  the  extent  of  a  rise  of  from  one  to  one 
and  a  half  per  cent  on  the  rate  of  interest  for  various 
municipal  bonds),  accumulating  objections  compelling  the 
public,  including  the  "progressives"  themselves,  to  take 
sober  second  thought  before  going  further. 

28.  Generally,  the  problem  of  tramways  in  England  is 
becoming  grave,  owing  to  the  introduction — where  per- 
mitted— of  the  motor-bus,  which,  involving  a  far  less  out- 
lay than  the  tramways,  is  able  to  furnish  a  more  conven- 


113 

lent  service.  In  the  streets  of  London  3,000  motor  omni- 
buses are  now  competing  seriously  with  the  tramways.  In 
certain  cities  the  municipal  authorities  refuse  to  license 
motor-buses,  thus  raising  a  hindrance  to  social  progress. 

29.  Glasgow  experience — in  fact,  unique — is  the  salient 
stock  argument  for  municipal  ownership.     But  nowhere 
else  has  so  fortuitous  a  combination  of  conditions  for 
municipal  success  existed,  especially  these  respecting  the 
tramway :    An  expiring  franchise,  a  blundering  company, 
electrification  made  possible  by  American  experiments,  and 
an  unusually  favorable  lay  of  the  streets  for  the  main  lines 
in  a  dense  population. 

30.  The  smart  appearance  of  British  conductors,  call- 
ing for  favorable  comment  by  American  municipalizers,  is 
helped  by  the  good   paving  of  the  clean  urban  streets 
through  which  the  British  cars  move  on  their  compara- 
tively short  routes.    The  long  runs  of  American  street  cars 
carry  them  over  dusty  or  muddy  roads,  and  in  the  North 
the  deep  snows  and  bitter  cold  of  winter  oblige  the  motor- 
men  and  conductors  to  seek  comfort  in  clothes  before  style. 

31.  The  possibilities  of  municipal  office-holding  graft 
and  sinecurism  in  street  car  operation  in  America  are  un- 
known, though  they  may  be  apprehended  on  seeing  the 
waste  in  public  works  departments.     The  possibilities  of 
company  abuses,  on  the  other  hand,  have  been  fully  ex- 
perienced, and,  since  they  have  been  studied,  the  provisions 
for  suppressing  them,  where  they  yet  exist,  are  at  the  com- 
mand of  the  voters.    The  needed  stipulations  as  to  the  rate 
of  fares  and  the  various  details  of  service,  with  the  neces- 
sary supervision,  through  public  service  commissions  or 
otherwise,  may  be  intelligently  prescribed  and  exercised 
by  the  state  or  local  governments.     This  done,  American 
citizens  shall  have  provided  their  chief  necessary  work  of 
defence  against  overcapitalization  and  poor  service.     Pre- 
vision and  provision  are  here  the  essentials  of  municipal 
duty.     But  with  municipal   operation,  eternal  vigilance 
every  day  over  every  step  in  both  receipts  and  expenditures 
is  requisite.    And  no  vigilance  can  wipe  out  the  ever-pres- 
ent danger  to  a  community  from  a  consolidated  mass  of 


114 

municipal  employees  possibly  voting  and  politically  striv- 
ing otherwise  for  their  own  interest  first  and  that  of  the 
public  afterward.  Greater  New  York  has  between  40,000 
and  50,000  transit  employees.  It  has  already  82,000 
municipal  employees. 

32.  A  significant  development  of  the  municipalization 
era  in  Great  Britain  was  the  speculative  purchase  and 
manipulation  of  both  moribund  and  mushroom  company 
systems  by  shady  financiers  for  the  purpose  of  "loading 
them  up"  on  the  municipalities.     In  certain  conspicuous 
cases  success  was  obtained  in  making  such  sales  to  mu- 
nicipal councils  enthusiastically  bent  on  reform. 

33.  Some  British  municipalities  in  electrifying  their 
tramway  systems  employed  American  engineers,  already 
qualified  for  the  work  by  experience.    Several  great  Amer- 
ican firms  and  companies,  with  British  headquarters  in 
London,  today  furnish  the  United  Kingdom  with  a  large 
portion  of  its  electric  supplies.    Municipalities  have  thus 
reaped  the  results  of  the  innumerable  experiments  made  by 
American  capitalists  in  the  first  stages  of  electrification, 
BritishAnunicipalities  not  only  do  not  usually  enter  upon 
experiments  to  improve  their  electric  machinery,  but  they 
continue  to  operate  dynamos  and  small  scattered  generat- 
ing stations  that  illustrate  methods  years  behind  the  pres- 
ent electric  age  of  high  power  machines  and  large-area  con- 
centration.    Municipalities  thus  take  few  of  the  risks  in 
the  "wastage  of  experimentation,"  and,  secure  in  indisput- 
able monopoly,  lag  behind  the  age  in  the  adoption  of  new 
methods  and  machinery.     (The  National  Civic  Federation 
investigation.) 

34.  Municipalization,  with  a  few  exceptions,  extends 
only  to  the  simple  acts  of  furnishing  power,  running  cars 
and  collecting  fares.    The  important  factors  of  construct- 
ing cars  and  manufacturing  supplies  generally  lies  beyond 
municipal  control  or  municipal  capabilities.    Purchases  of 
equipment  are  mostly  from  private  manufacturers. 

35.  Comparisons  instituted  a  decade  ago  between  the 
British  and  the  American  systems  of  street-car  transit,  yet 
embodied  in  the  municipal  ownership  propaganda  litera- 


115 

ture  of  the  subject,  were  usually  made  either  before  com- 
petent investigation  of  the  subject  took  place  or  before  the 
recent  era  of  increasingly  strict  regulation  in  America. 
The  revolution  in  street-car  finances  brought  about  in  New 
York  through  the  Public  Service  Commission  in  the  seven 
years  of  its  existence  has  had  no  parallel  in  Great  Britain 
in  abolishing  monopoly  advantages. 

36.  Municipal    street-car    administration   is   bureau- 
cratic.   In  contrast  with  it,  companies,  under  just  and  ef- 
ficient regulation,  can  exhibit  the  elasticity,  initiative,  en- 
terprise, organization,  foresight  in  purchasing,  and  general 
progressiveness  characteristic  of  free  industry,  to  the  ulti- 
mate benefit  of  society. 

37.  New  York,  in  its  subways,  is  exhibiting  the  possi- 
bilities of  municipal  guaranty  in  construction,  with  all  the 
municipal  ownership  desirable  at  the  end  of  a  term  of 
years,  the  city  meantime  having  the  advantages  of  com- 
pany operation. 

38.  The  distinction  sought  by  municipalists  through 
the  words  "private"  and  "public"  ownership  must  be  essen- 
tially modified  by  the  fact  that  no  system  is  wholly  "pri- 
vate."    The   State,  as  original  owner  of  the  highways, 
grants  the  right  of  way,  under  a  franchise  in  which  com- 
plete provision  should,  and  today  often  is,  made  for  the 
defense  of  the  public  rights  involved.    Thus  "regulation," 
though  in  the  early  stages  lacking  thoroughness,  has  al- 
ways in  some  degree  been  inevitable.     In  Great  Britain 
franchises  for  the  horse-car  systems,  when  established  in 
the  '60s  and  '70s,  were  commonly  granted  for  a  term  of 
twenty-one  years,  and  the  grantees,  uncertain  of  the  future 
beyond  their  term,  made  no  provision  for  improvements  in 
traffic  methods  or  readjustment  of  fares  other  than  neces- 
sary for  temporary  operation.    In  the  United  States  many 
growing  but  needy,  though  aspiring,  cities,  competing  to 
obtain  local  investment  of  capital,  at  the  beginning  of  the 
development  of  the  street-car  industry  gave  perpetual  fran- 
chises.   With  radical  differences  in  tenure  of  ownership  in 
the  two  countries  arose  wide  differences  in  operation  and 
development,  the  general  outcome  being  that  America  gives 


116 

by  far  the  better  service.  "The  American  system,  to  our 
minds,  is  not  only  cheaper  to  the  public,  all  things  con- 
sidered, but  the  service  is  better  with  a  great  deal  more 
of  it."  ( Report  of  American  Federation  of  Labor  Commit- 
tee on  "Labor  Conditions — European  Municipally  Owned 
Roads,"  1914.) 

39.  In  America,  the  most  highly  authoritative  state- 
ment as  to  the  present  general  position  of  street-car  system 
franchise-holders,  made  by  the  company  representatives  on 
a  commission  of  investigation  of  the  subject,  reads  as 
follows : 

"The  opponents  of  municipal  (or  state)  ownership  and 
operation,  themselves  by  no  means  ultra-conservatives, 
have  also  their  prevention  for  possible  abuse  of  a  monopoly 
of  the  use  of  the  highways  in  any  particular  industry. 
Their  proposition  differs  radically  from  that  of  the  mu- 
nicipalizers,  in  political,  economic  and  moral  standards. 
They  would  have  franchises,  contract  and  regulation  re- 
main the  irremovable  bases  for  all  public  work  in  the  per- 
formance of  which  exclusive  occupancy  of  the  highway 
presents  the  leading  social  problem.  They  would  have  the 
community  prescribe — sharply,  clearly  and  fully — private 
operation,  without  granting  monopolistic  powers  in  fixing 
prices  or  otherwise.  They  are  convinced  that  a  community 
can  so  define  the  best  conditions  for  the  operation  of  each 
of  its  industries  which  requires  a  franchise  that  both  the 
community  and  the  franchise  holders  would  achieve  the 
recognized  benefits  of  free  industry,  while  leaving  the  man- 
agement in  a  position  favorable  to  unimpeded  initiative  in 
conducting  its  business.  Any  community  in  America  can 
command  the  eager  services  of  abundant  capital  if  it  will 
offer:  1.  Current  interest  on  investment  in  the  working 
property  of  an  enterprise.  2.  Wages  of  superintendence 
and  labor.  3.  Compensation  for  risk  in  initiation  and 
maintenance.  4.  Fair  yield  from  the  increase  of  business, 
or  economy  of  operation,  arising  from  energy  in  adminis- 
tration and  improvements  in  methods  and  machines.  5. 
Preservation  of  that  due  regard  for  vested  interests  neces- 
sarv  for  an  established  confidence  in  the  rectitude  and  in- 


117 


tegrity  of  organized  authority.  Manager  and  investor 
must  have  guarantee  that  where  they  have  sown  they  may 
reap.  This  assured,  the  consequent  gains  to  society  would 
be  everything  promised  but  never  yet  realized  by  the  mu- 
nicipalizers,  together  with  higher  financial  results  both  to 
the  community  and  the  consumer,  a  firmer  foundation  to 
the  State,  a  far  better  protection  of  the  rights  and  enjoy- 
ments of  all  its  citizens,  and  a  conservation  of  the  energies 
of  the  world." 

40.  The  sweeping  claims  continually  made  a  decade 
ago  and  even  later  by  municipalists  as  to  the  superiorities 
of  British  city  transit  systems  over  American,  and  the  con- 
fident assertions  that  only  through  municipalization  could 
America  reform  her  systems,  w^ere  proven  to  be  baseless 
eight  years  ago  on  a  scientific  investigation  of  the  question 
in  which  seven  of  the  foremost  American  advocates  of 
municipal  ownership  had  a  fair  and  full  share  of  the  work 
of  inquiry  as  members  of  a  mixed  committee  of  twenty-one. 
At  its  conclusion  not  one  of  this  committee  would  recom- 
mend municipalization.    Since  that  date  the  work  of  regu- 
lation, as  recommended  by  that  committee,  has  proceeded 
apace  throughout  the  country,  the  principle  adopted  gen- 
erally  being   state   or   municipal   control   in    essentials. 
Americans  well  informed  as  to  street-car  transportation, 
whether  dealing  with  the  problem  from  the  standpoint  of 
practical  operators,  employees,  legal  advisers,  financiers, 
or  disinterested  citizens,  are  in  general  convinced  both  of 
the  insuperable  obstacles  in  this  country  to  successful  mu- 
nicipal operation  and  of  the  positive  advantages,  in  every 
essential,  achieved  or  to  be  duly  achieved,  through  the  prin- 
ciple of  regulation.    "Municipal  ownership"  has  in  general 
become  a  mere  vote-catching  cry  of  innocents  or  dema- 
gogues.    (In  a  few  places  present  municipalization  has 
seemed  to  be  the  only  solution  of  a  complicated  problem.) 

41.  In  the  development  of  street-car  systems  in  Amer- 
ica there  have  usually  been  three  eras  previous  to  the  pres- 
ent period  of  competent  regulation:     (1)  Twenty  to  fifty 
years  ago,  in  growing  towns,  East  and  West,  the  financial 
desideratum,  alike  with  city  authorities  and  local  specula- 


118 

tive  promoters,  was  the  attraction  of  capital,  and  in  this 
economic  situation  extraordinary  inducements  were  freely 
offered  the  managing  capitalists  of  the  nation's  money  cen- 
tres, including  perpetual  franchises  and  liberal  concessions 
as  to  service,  extensions  and  powers  generally;  (2)  fol- 
lowed a  period  characterized  by  the  booming  of  companies, 
the  issuing  of  bonds  and  stocks  to  an  unwarrantable  limit, 
and  the  advancing  of  the  schemes  of  groups  of  financiers 
regardless  of  the  public  interest;  (3)  came  demand  for 
reform,  in  time  attaining  a  stage  of  tumultuous  clamor, 
of  loud  demands  for  the  punishment  of  corporations,  and 
of  unmeasured  claims  for  the  possibilities  of  unproven  in- 
novations in  municipal  activity.  This  latest  era  has  now 
reached  the  turning  point  to  sober  thought  and  exact  in- 
formation, at  which  our  country  is  adopting  business 
methods  in  municipal  affairs,  in  conformity  with  American 
principles  and  the  standards  of  national  intelligence  and 
character. 

42.  A  summary  of  the  results  of  a  systematic  control 
of  city  transit  systems  in  the  United  States  achieved  with- 
in the  last  five  to  ten  years,  since  the  policy  of  just  and 
efficient  regulation  has  been  clearly  recognized  and  defin- 
itely adopted  as  a  consequence  of  the  widespread  discus- 
sion of  the  subject,  would  show — especially  in  New  York 
and  Chicago — such  a  rearrangement  in  the  methods  for 
defense  of  the  rights  of  the  public  as  has  been  in  effect  an 
economic  revolution.  In  Chicago  a  paper  capitalization  of 
the  traction  lines  amounting  to  $99,000,000  was,  at  the  ex- 
piration of  their  franchises,  brought  down  to  $50,000,000 
as  the  true  value  of  the  properties,  and  no  new  bonded  debt 
was  thenceforth  permissible  except  on  actual  improve- 
ments. In  New  York  the  establishment  of  the  Public 
Service  Commission  in  1907  was  immediately  followed  by 
a  collapse  in  the  fictitious  values  of  certain  of  the  principal 
surface  lines,  which,  after  passing  through  the  hands  of 
receivers,  are  now  on  a  solid  basis  and  subject  to  a  state 
control  which  ceases  only  short  of  operation.  The  New 
York  subway  system,  its  total  value  to  be  more  than 
$300,000,000,  has  been  made  subject  to  the  Public  Service 
Commission  in  respect  to  finance,  construction,  character 


119 

of  service,  and  final  ownership  by  the  city.  The  methods  of 
joint  ownership  by  city  and  company,  as  brought  about  in 
Chicago  and  New  York,  have  been,  in  project  and  outcome, 
a  peculiarly  American  problem,  the  satisfactory  solution 
of  which  is  reflected  in  the  rapid  sale  and  sound  market 
value  of  the  securities  relating  to  the  colossal  undertakings 
in  the  two  cities. 

43.  Most  of  the  foregoing  statements  of  fact  are  verifi- 
able in  the  public  and  college  reference  libraries  of  Amer- 
ica. Nearly  all  may  be  readily  checked  up  by  any  com- 
petent investigator. 

Conclusion:  America  is  abundantly  qualified  to  give 
Great  Britain  lessons,  in  all  essentials,  in  the  principles 
and  methods  of  city  transit  ownership  and  operation. 


Tke  McC»nmell  Printing  Co.,  *  230-242  William  St.,  N.  T. 


r 


EXECUTIVE      COIVIIV1  IT-TEE 


THE  NATIONAL  CIVIC  FEDERATION 

On  the  part  of  the  Public: — 

WILLIAM  HOWARD  TAFT  (Fellow    Yale  University),  New  Haven,  Conn. 

FRANKLIN  MacVEAGH   (former  Sec.  of  the  Treasury),  Washington,  D.   C. 

ELIHU  ROOT   (United  States  Senator),  New  York  City. 

ANDREW  CARNEGIE   (Philanthropist),  New  York  City. 

NICHOLAS  MURRAY   BUTLER    (President  Columbia  University),  N.    Y.   C. 

JAMES  SPEYER  (Speyer  &  Co.),  New  York  City. 

FRANCIS  LYNDE  STETSON   (Attorney),  New  York  City. 

ROBERT  M.  THOMPSON  (Chairman  Executive  Committee  Navy  League), 
Washington,  D.  C. 

V.  EVERIT  MACY   (Capitalist),  New  York  City. 

MARCUS  M.  MARKS  (President  Borough  of  Manhattan),  New  York  City. 

WALTER  GEORGE  SMITH  (former  President  Conference  of  Commission- 
ers on  Uniform  State  Laws),  Philadelphia,  Pa. 

ALBERT  SHAW  (Editor    "Review  of  Reviews"),  New  York  City. 

THEODORE  MARBURG  (Political  Economist),  Baltimore,  Md. 

JEREMIAH  W.  JENKS  (Professor  of  Government,  N.  Y.  Univ.),  N.  Y.  City. 

TALCOTT  WILLIAMS  (Director  of  the  School  of  Journalism,  Columbia  Uni- 
versity), New  York  City. 

On  the  part  of  Employers: — 

WILLIAM  D.  BALDWIN   (President  Otis  Elevator  Co.),  New  York  City. 
NICHOLAS  F.  BRADY  (President  New  York  Edison  Co.),  New  York  City. 
LOUIS  A.  COOLIDGE   (Treas.  United  Shoe  Machinery  Corp.),  Boston,  Mass 
GEORGE  B.  CORTELYOU  (President  Consolidated  Gas  Co.),  New  York  City 
HENRY  P.  DAVISON  (J.  P.  Morgan  &  Co.),  New  York  City. 
OTTO  M.  EIDLITZ   (Building  Trades  Employers'  Association),  N.  Y.  City. 
ADOLPH  LEWISOHN  (International  Smelting  and  Refining  Co.),  N.  Y.  City 
SAMUEL  MATHER   (Pickands,  Mather  &  Co.),  Cleveland,  Ohio. 
OGDEN  L.  MILLS   (Director  International  Paper  Co.),  New  York  City. 
GEORGE  M.   REYNOLDS   (President  Continental  and  Commercial  National 

Bank),  Chicago,  111. 

J.  G.  SCHMIDLAPP  (Banker),  Cincinnati,  Ohio. 
LOUIS  B.    SCHRAM    (Chairman   Labor   Committee,   United   States   Brewers' 

Association),  New  York  City. 

A.  H.  SMITH  (President  New  York  Central  Lines),  New  York  City. 
FRANK    TRUMBULL    (Chairman    Board    of   Directors,    Chesapeake    &    Ohio 

Railway),  New  York  City. 

THEODORE  N.  VAIL   (President  Amer.  Tel.  and  Tel.   Co.),   New  York  City 
HARRIS  WEINSTOCK  (Weinstock-Nichols  Co.),  San  Francisco,  Cal. 

On  the  part  of  Wage  Earners: — 

SAMUEL  GOMPERS   (Pres.  Amer.   Federation  of  Labor),  Washington    D    C 

WARREN  S.  STONE  (Grand  Chief  International  Brotherhood  of  Locomo- 
tive Engineers),  Cleveland,  Ohio. 

JAMES  DUNCAN  (President  Granite  Cutters'  International  Association  of 
America),  Quincy,  Mass. 

JAMES  M.  LYNCH  (former  President  International  Typographical  Union), 
Indianapolis,  Ind. 

A.  B.  GARRETSON  (Pres.  Order  of  Railway  Conductors),  Cedar  Rapids,  la. 

W.  G.  LEE  (President  Brotherhood  Railroad  Trainmen),  Cleveland,  Ohio. 

T.  V.  O'CONNOR  (President  International  Longshoremen's  Association), 
Buffalo,  N.  Y. 

WILLIAM  D.  MAHON  (President  Amalgamated  Association  of  Street  Rail- 
way Employes  of  America),  Detroit,  Mich. 

TIMOTHY  HEALY  (President  International  Brotherhood  of  Stationary 
Firemen),  New  York  City. 

W.  S.  CARTER  (President  Brotherhood  Locomotive  Firemen  and  Engine- 
men),  Peoria,  111. 

JOHN  GOLDEN  (Pres.  United  Textile  Workers  of  Amer.),  Fall  River,  Mass. 

WILLIAM  A.  COAKLEY  (President  International  Lithographic  Press  Feed- 
ers' Protective  Association),  New  York  City. 

DANIEL  J.  TOBIN  (President  International  Brotherhood  of  Teamsters), 
Indianapolis,  Ind. 

JOHN  F.  TOBIN  (Gen.  Pres.  Boot  and  Shoe  Workers'  Union),  Boston,  Mass. 

JOSEPH  F.  VALENTINE  (President  International  Molders'  Union  of  North 
America),  Cincinnati,  Ohio. 

DENIS  A.  HAYES  (President  Glass  Bottle  Blowers'  Association  of  United 
States  and  Canada),  Philadelphia,  Pa 

AND  MEMBERS  OF   EXECUTIVE  COUNCIL 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 


RETURN  TO  the  circulation  desk  of  any 
University  of  California  Library 

or  to  the 

NORTHERN  REGIONAL  LIBRARY  FACILITY 
Bldg.  400,  Richmond  Field  Station 
University  of  California 
Richmond,  CA  94804-4698 

ALL  BOOKS  MAY  BE  RECALLED  AFTER  7  DAYS 

•  2-month  loans  may  be  renewed  by  calling 
(510)642-6753 

•  1-year  loans  may  be  recharged  by  bringing 
books  to  NRLF 

•  Renewals  and  recharges  may  be  made  4 
days  prior  to  due  date. 

DUE  AS  STAMPED  BELOW 

MAY  1  5  Z001 


12,000(11/95) 


U.C.BERKELEY  LIBRARIES 


UNIVERSITY  OF  CALIFORNIA  UBRARY 


